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The Impact of Economic Reform on the Performance of Chinese State Enterprises: 1980--1989

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  • Wei Li

    (Duke University)

Abstract

The effectiveness of China's incremental industrial reform between 1980--89 is empirically investigated using a panel data set of 769 state enterprises from 36 2--digit industries. I derive and apply a method that measures marginal products of factors, changes in total factor productivity (TFP), and improvements in factor allocation between enterprises by comparing actual changes in output to actual changes in inputs. Under this approach, the production functions can differ arbitrarily across firms. Market power in product markets and deviations from efficient allocation of factors are also permitted. This study finds that there were marked improvements in marginal productivity of factors and in TFP between 1980--89, and that over 73 percent of output growth was attributable to TFP growth, and over 87 percent of TFP growth was attributable to improved incentives, intensified product market competition, and improvements in factor allocation.

Suggested Citation

  • Wei Li, 1994. "The Impact of Economic Reform on the Performance of Chinese State Enterprises: 1980--1989," Development and Comp Systems 9410001, EconWPA.
    • Handle: RePEc:wpa:wuwpdc:9410001
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    References listed on IDEAS

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    1. Byrd, William A., 1989. "Plan and market in the Chinese economy: A simple general equilibrium model," Journal of Comparative Economics, Elsevier, vol. 13(2), pages 177-204, June.
    2. Woo Wing Thye & Hai Wen & Jin Yibiao & Fan Gang, 1994. "How Successful Has Chinese Enterprise Reform Been? Pitfalls in Opposite Biases and Focus," Journal of Comparative Economics, Elsevier, vol. 18(3), pages 410-437, June.
    3. Gallant, A. Ronald & Jorgenson, Dale W., 1979. "Statistical inference for a system of simultaneous, non-linear, implicit equations in the context of instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 275-302.
    4. McMillan, John & Whalley, John & Zhu, Lijing, 1989. "The Impact of China's Economic Reforms on Agricultural Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 781-807, August.
    5. Douglas W. Caves & Laurits R. Christensen & Joseph A. Swanson, 1980. "Productivity in U.S. Railroads, 1951-1974," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 166-181, Spring.
    6. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
    7. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
    8. Theodore Groves & Yongmiao Hong & John McMillan & Barry Naughton, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 183-209.
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    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth
    • P - Economic Systems

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