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Reforms and Productivity Dynamics in Chinese State-Owned Enterprises

Author

Listed:
  • McGoldrick, Peter

    (Trinity College Dublin)

  • Walsh, Patrick Paul

    (University College Dublin)

Abstract

Institutional change has taken place gradually since 1978 for State-Owned Enterprises (SOEs) in the Industrial Sector of China. In this paper we estimate the effect of deep reform (the right to hire and fire labour, buy and sell capital and operate on international markets) on the productivity dynamics of enterprises. Using a unique balanced panel of 681 SOEs for the period 1980 to 1994, we find consistent production function estimates using an algorithm put forward in Olley and Pakes (1996), which corrects for simultaneity bias. Furthermore, we allow selection to reform to be endogenous, and correct for this selection bias by formulating an entry rule to reform similar to the Olley and Pakes (1996) exit rule. We show that exposure to deep reform have lead to higher productivity realisations while remaining under state ownership.

Suggested Citation

  • McGoldrick, Peter & Walsh, Patrick Paul, 2004. "Reforms and Productivity Dynamics in Chinese State-Owned Enterprises," IZA Discussion Papers 1201, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1201
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    References listed on IDEAS

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    1. Richard Blundell & Stephen Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
    2. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    3. Jefferson, Gary H., 1989. "Potential sources of productivity growth within Chinese industry," World Development, Elsevier, vol. 17(1), pages 45-57, January.
    4. repec:lic:licosd:7198 is not listed on IDEAS
    5. McMillan, John & Naughton, Barry, 1992. "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 8(1), pages 130-143, Spring.
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    Cited by:

    1. Marian Rizov & Patrick Paul Walsh, 2005. "Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp98, IIIS.

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    More about this item

    Keywords

    selection to reform; simultaneity; production functions; productivity; Chinese Industrial State-Owned Enterprises;
    All these keywords.

    JEL classification:

    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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