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The Effects of Federalism and Privatization on Productivity in Chinese Firms

  • Sean M. Dougherty

    (The Conference Board)

  • Robert H. McGuckin

    (The Conference Board)

This study offers empirical evidence about how the structure of government and private ownership affects productivity in Chinese firms. It uses the microdata of China's most recent decennial industrial census, covering all of the 23,000 large and medium industrial firms operating in China during 1995. The results show that government decentralization – 'federalism' – plays an important role in improving the performance of not just collective firms, but also state-owned and mixed public/private ownership firms. This result is strongly confirmatory of much of the recent theoretical work on transition economies that posits a key role for government in the efficient operation of markets. Privatization makes a big difference in performance for firms administered at the federal level, especially state-owned enterprises. Private ownership also makes a large difference for wholly foreign-owned firms, nearly all located in special districts. In local jurisdictions, however, there is little difference in productivity across the various nonstate ownership types, supporting the argument that the regulatory environment played a critical role in successful business performance.

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File URL: http://128.118.178.162/eps/dev/papers/0411/0411016.pdf
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Paper provided by EconWPA in its series Development and Comp Systems with number 0411016.

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Length: 31 pages
Date of creation: 15 Nov 2004
Date of revision:
Handle: RePEc:wpa:wuwpdc:0411016
Note: Type of Document - pdf; pages: 31
Contact details of provider: Web page: http://128.118.178.162

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  1. Jiahua Che & Yingyi Qian, . "Institutional Environment, Community Government, and Corporate Governance: Understanding China's Township-Village Enterprises," Working Papers 97043, Stanford University, Department of Economics.
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  3. Barberis, Nicholas & Boycko, Maxim & Shleifer, Andrei & Tsukanova, Natalia, 1996. "How Does Privatization Work? Evidence from the Russian Shops," Scholarly Articles 3451306, Harvard University Department of Economics.
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  12. Alwyn Young, 2000. "The Razor'S Edge: Distortions And Incremental Reform In The People'S Republic Of China," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1091-1135, November.
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  16. Li, David D., 1996. "A Theory of Ambiguous Property Rights in Transition Economies: The Case of the Chinese Non-State Sector," Journal of Comparative Economics, Elsevier, vol. 23(1), pages 1-19, August.
  17. Robert H Mcguckin & Bradford J Jensen, 1996. "Firm Performance And Evolution Empirical Regularities In The U.S. Microdata," Working Papers 96-10, Center for Economic Studies, U.S. Census Bureau.
  18. Li, Shaomin & Li, Shuhe & Zhang, Weiying, 2000. "The Road to Capitalism: Competition and Institutional Change in China," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 269-292, June.
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  22. Zhang, Anming & Zhang, Yimin & Zhao, Ronald, 2001. "Impact of Ownership and Competition on the Productivity of Chinese Enterprises," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 327-346, June.
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