IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v21y2010i2p282-292.html
   My bibliography  Save this article

The costs and benefits of government control: Evidence from China's collectively-owned enterprises

Author

Listed:
  • Lu, Jiangyong
  • Tao, Zhigang
  • Yang, Zhi

Abstract

China's collectively-owned enterprises are unconventional, as they are nominally owned by those people residing in the areas where the enterprises are located but effectively controlled by the local governments. This study finds that collectively-owned enterprises, once being privatized, encounter an increase in the cost of goods sold to sales ratio but manage to lower down the managerial expenses to sales ratio. The findings imply that local government officials may help collectively-owned enterprises gain access to cheaper production inputs, but they may use those enterprises to pursue private benefits, thereby shedding lights on the costs and benefits of government control.

Suggested Citation

  • Lu, Jiangyong & Tao, Zhigang & Yang, Zhi, 2010. "The costs and benefits of government control: Evidence from China's collectively-owned enterprises," China Economic Review, Elsevier, vol. 21(2), pages 282-292, June.
    • Handle: RePEc:eee:chieco:v:21:y:2010:i:2:p:282-292
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043-951X(09)00124-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Du, Julan & Xu, Chenggang, 2009. "Which Firms went Public in China? A Study of Financial Market Regulation," World Development, Elsevier, vol. 37(4), pages 812-824, April.
    2. Martin L. Weitzman & Chenggang Xu, 1997. "Chinese Township-Village Enterprises as Vaguely Defined Cooperatives," International Economic Association Series, in: John E. Roemer (ed.), Property Relations, Incentives and Welfare, chapter 12, pages 326-355, Palgrave Macmillan.
    3. Hongbin Cai & Hanming Fang & Lixin Colin Xu, 2005. "Eat, Drink, Firms and Government: An Investigation of Corruption from Entertainment and Travel Costs of Chinese Firms," NBER Working Papers 11592, National Bureau of Economic Research, Inc.
    4. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    5. Che, Jiahua & Qian, Yingyi, 1998. "Institutional Environment, Community Government, and Corporate Governance: Understanding China's Township-Village Enterprises," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 14(1), pages 1-23, April.
    6. Chang Chun & Wang Yijiang, 1994. "The Nature of the Township-Village Enterprise," Journal of Comparative Economics, Elsevier, vol. 19(3), pages 434-452, December.
    7. David D. Li, 1996. "A Theory of Ambiguous Property Rights in Transition Economies: The Case of the Chinese Non-State Sector," William Davidson Institute Working Papers Series 8, William Davidson Institute at the University of Michigan.
    8. Hsiao, Cheng & Nugent, Jeffrey & Perrigne, Isabelle & Qiu, Jicheng, 1998. "Shares versus Residual Claimant Contracts: The Case of Chinese TVEs," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 317-337, June.
    9. Jiahua Che & Yingyi Qian, 1998. "Insecure Property Rights and Government Ownership of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 467-496.
    10. Jefferson, Gary H. & Su, Jian, 2006. "Privatization and restructuring in China: Evidence from shareholding ownership, 1995-2001," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 146-166, March.
    11. Hongbin Cai & Qiao Liu, 2009. "Competition and Corporate Tax Avoidance: Evidence from Chinese Industrial Firms," Economic Journal, Royal Economic Society, vol. 119(537), pages 764-795, April.
    12. Lawrence J. Lau & Yingyi Qian & Gerard Roland, 2000. "Reform without Losers: An Interpretation of China's Dual-Track Approach to Transition," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 120-143, February.
    13. Tian, Guoqiang, 2000. "Property Rights and the Nature of Chinese Collective Enterprises," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 247-268, June.
    14. 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.
    15. Jiahua Che, 2003. "The Life Cycle of Government Ownership," William Davidson Institute Working Papers Series 2003-627, William Davidson Institute at the University of Michigan.
    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. Yingyi Qian, 2000. "The Process of China's Market Transition (1978-1998): The Evolutionary, Historical, and Comparative Perspectives," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(1), pages 151-151, March.
    18. Chen, Hongyi & Rozelle, Scott, 1999. "Leaders, managers, and the organization of township and village enterprises in China," Journal of Development Economics, Elsevier, vol. 60(2), pages 529-557, December.
    19. Bai, Chong-En & Lu, Jiangyong & Tao, Zhigang, 2009. "How does privatization work in China?," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 453-470, September.
    20. Ito, Junichi, 2006. "Economic and institutional reform packages and their impact on productivity: A case study of Chinese township and village enterprises," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 167-190, March.
    21. Li, Hongbin, 2003. "Government's budget constraint, competition, and privatization: evidence from China's rural industry," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 486-502, September.
    22. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1153-1191.
    23. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 995-1025.
    24. Naughton, Barry, 1994. "Chinese Institutional Innovation and Privatization from Below," American Economic Review, American Economic Association, vol. 84(2), pages 266-270, May.
    25. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    26. Hehui Jin & Yingyi Qian, 1998. "Public Versus Private Ownership of Firms: Evidence from Rural China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 773-808.
    27. Chong-En Bai & Jiangyong Lu & Zhigang Tao, 2006. "The Multitask Theory of State Enterprise Reform: Empirical Evidence from China," American Economic Review, American Economic Association, vol. 96(2), pages 353-357, May.
    28. Dong, Xiao-yuan & Putterman, Louis, 1997. "Productivity and Organization in China's Rural Industries: A Stochastic Frontier Analysis," Journal of Comparative Economics, Elsevier, vol. 24(2), pages 181-201, April.
    29. Li, Hongbin & Rozelle, Scott, 2004. "Insider privatization with a tail: the screening contract and performance of privatized firms in rural China," Journal of Development Economics, Elsevier, vol. 75(1), pages 1-26, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nie, Huihua & Jiang, Ting & Yang, Rudai, 2012. "A Review and Reflection on the Use and Abuse of Chinese Industrial Enterprises Database," MPRA Paper 50945, University Library of Munich, Germany.
    2. Yang, Zhenbing & Chen, Zhuo & Shi, Qi & Yan, Bing, 2021. "Does outward foreign direct investment increase debt ratio? Firm-level evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 1-12.
    3. Lixing Li & Guangrong Ma, 2015. "Government Size and Tax Evasion: Evidence from China," Pacific Economic Review, Wiley Blackwell, vol. 20(2), pages 346-364, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ito, Junichi, 2006. "Economic and institutional reform packages and their impact on productivity: A case study of Chinese township and village enterprises," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 167-190, March.
    2. Jiahua Che, 2003. "The Life Cycle of Government Ownership," William Davidson Institute Working Papers Series 2003-627, William Davidson Institute at the University of Michigan.
    3. Kung, James Kai-sing & Lin, Yi-min, 2007. "The Decline of Township-and-Village Enterprises in China's Economic Transition," World Development, Elsevier, vol. 35(4), pages 569-584, April.
    4. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
    5. Tetsushi Sonobe & Keijiro Otsuka, 2004. "Productivity Effects of TVE Privatization: The Case Study of Garment and Metal-Casting Enterprises in the Greater Yangtze River Region," NBER Chapters, in: Governance, Regulation, and Privatization in the Asia-Pacific Region, pages 231-247, National Bureau of Economic Research, Inc.
    6. Xu, Cheng-Gang, 2010. "The Institutional Foundations of China?s Reforms and Development," CEPR Discussion Papers 7654, C.E.P.R. Discussion Papers.
    7. Che, Jiahua, 2002. "Rent Seeking and Government Ownership of Firms: An Application to China's Township-Village Enterprises," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 787-811, December.
    8. Marcus Conlé, 2011. "Tracing the Process of Property Rights Specification in China: The Case of New Technology Enterprises," Chapters, in: Werner Pascha & Cornelia Storz & Markus Taube (ed.), Institutional Variety in East Asia, chapter 3, Edward Elgar Publishing.
    9. Jiahua Che, 2002. "From the Grabbing Hand to the Helping Hand: A Rent Seeking Model of China's Township-Village Enterprises," WIDER Working Paper Series DP2002-13, World Institute for Development Economic Research (UNU-WIDER).
    10. Xu, Chenggang & Zhang, Xiaobo, 2009. "The evolution of Chinese entrepreneurial firms: Township-village enterprises revisited," IFPRI discussion papers 854, International Food Policy Research Institute (IFPRI).
    11. Loren Brandt & Hongbin Li & Joanne Roberts, 2001. "Why do Governments Privatize," William Davidson Institute Working Papers Series 429, William Davidson Institute at the University of Michigan.
    12. Yingyi Qian, 1999. "The Institutional Foundations of China's Market Transition," Working Papers 99011, Stanford University, Department of Economics.
    13. Xu, Cheng-Gang & Guo, Di & Jiang, Kun & Yang, Xiyi, 2017. "Clustering, Growth, and Inequality in China," CEPR Discussion Papers 12543, C.E.P.R. Discussion Papers.
    14. Yingyi Qian, 2002. "How Reform Worked in China," William Davidson Institute Working Papers Series 473, William Davidson Institute at the University of Michigan.
    15. Qian, Yingyi, 2002. "How Reform Worked in China," CEPR Discussion Papers 3447, C.E.P.R. Discussion Papers.
    16. Li, Hongbin, 2003. "Government's budget constraint, competition, and privatization: evidence from China's rural industry," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 486-502, September.
    17. Jiahua Che, 2000. "From the Grabbing Hand to the Helping Hand," William Davidson Institute Working Papers Series 58, William Davidson Institute at the University of Michigan.
    18. Pan, Xia & Cheng, Wenyin & Gao, Yuning, 2022. "The impact of privatization of state-owned enterprises on innovation in China: A tale of privatization degree," Technovation, Elsevier, vol. 118(C).
    19. Xia, Jun & Li, Shaomin & Long, Cheryl, 2009. "The Transformation of Collectively Owned Enterprises and its Outcomes in China, 2001-05," World Development, Elsevier, vol. 37(10), pages 1651-1662, October.
    20. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:21:y:2010:i:2:p:282-292. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.