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The Impact of Ownership Reform in Chinese Industry, 1995-2001

  • Gary H. Jefferson

    ()

  • Su Jian
  • Jiang Yuan
  • Yu Xinhua

During the 1980s, the restructuring of Chinese industry was driven principally by the entry of new enterprises into the enterprise system and by the restructuring of managerial incentives. In 1993, China’s leadership formally inaugurated the shareholding experiment. This paper examines the impact on eight performance measures of the conversion of both state- and collective-owned enterprises to shareholding enterprises. The analysis distinguishes between the direct effect of conversion and the induced effect, involving the attraction of non-state investment, which reduces the proportion of state assets and state control rights. We find evidence for SOEs that both conversion and a decline in the share of state-owned assets motivate rising productivity and R&D intensity. While rising proportions of non-state assets motive lower employment and rising wages, the initial conversion effect is associated with higher employment and lower wages. These latter impacts may result from agreements with workers as part of the conversion process. The SOE conversion process exhibits selection bias in which SOEs with high rates of capital productivity and profitability, high tax burdens, and comparatively low wages and smaller labor forces are more likely to be selected for conversion. No similar selection bias is evident in the collective sector.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 542.

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Length: 21 pages
Date of creation: 01 Feb 2003
Date of revision:
Handle: RePEc:wdi:papers:2003-542
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  1. Rafael La Porta & Florencio López-de-Silanes, 1997. "The Benefits of Privatization : Evidence from Mexico," World Bank Other Operational Studies 11583, The World Bank.
  2. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  3. Li, Hongbin & Rozelle, Scott, 2000. "Saving or stripping rural industry: an analysis of privatization and efficiency in China," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 23(3), September.
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  5. Lin, Justin Yifu & Cai, Fang & Li, Zhou, 1998. "Competition, Policy Burdens, and State-Owned Enterprise Reform," American Economic Review, American Economic Association, vol. 88(2), pages 422-27, May.
  6. Dong, Xiao-yuan & Bowles, Paul & Ho, Samuel P. S., 2002. "The Determinants of Employee Ownership in China's Privatized Rural Industry: Evidence from Jiangsu and Shandong," Journal of Comparative Economics, Elsevier, vol. 30(2), pages 415-437, June.
  7. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
  8. Dong, Xiao-yuan & Bowles, Paul & Ho, Samuel P. S., 2002. "Share Ownership and Employee Attitudes: Some Evidence from China's Postprivatization Rural Industry," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 812-835, December.
  9. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers.
  10. McMillan, John & Naughton, Barry, 1992. "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 130-43, Spring.
  11. Li, Hongbin & Rozelle, Scott, 2000. "Saving or stripping rural industry: an analysis of privatization and efficiency in China," Agricultural Economics, Blackwell, vol. 23(3), pages 241-252, September.
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