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Adjustment of State Owned and Foreign-Funded Enterprises in China to Economic Reforms,1980s-2007: a logistic smooth transition regression (LSTR) approach

  • Joshua Aizenman
  • Nan Geng

This paper applies a logistic smooth transition regression approach to the estimation of a homogenous aggregate value added production function of the State Owned (SOE) and Foreign-Funded Enterprises (FFE) in China, 1980s-2007. The transition associated with the economic reforms in China is estimated applying a curvilinear logistic function, where the speed and the timing of the transition are endogenously determined by the data. We find high but gradually declining markups in both SOEs and FFEs during the early stages of the adjustment, with SOEs having a much larger scale and market size than the FFEs. However, over the transition process, returns to scale in industrial SOEs dropped sharply. For both FFEs and SOEs the transition is slow, with a midpoint about 7 and 14 years, respectively. We find significant increase of TFP growth rate for both FFEs and SOEs, by 0.1436 and 0.1971, respectively.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15274.

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Date of creation: Aug 2009
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Handle: RePEc:nbr:nberwo:15274
Note: ITI
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  5. González, Andrés & Teräsvirta, Timo & van Dijk, Dick, 2005. "Panel Smooth Transition Regression Models," SSE/EFI Working Paper Series in Economics and Finance 604, Stockholm School of Economics.
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  8. Caprio, Gerard & Honohan, Patrick, 2001. "Finance for Growth: Policy Choices in a Volatile World," MPRA Paper 9929, University Library of Munich, Germany.
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