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Agglomeration and Selection Effects in Privatized-SOEs: The Role of SOE Reforms

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  • Yikai Zhao
  • Jun Nagayasu

Abstract

While privatizing state-owned enterprises (SOE) has been a global trend, its success as an economic policy remains controversial. Focusing on agglomeration and selection effects in firms with different types of ownership, we examine the impact of SOE privatization on firm productivity and how these effects alter during the SOE privatization process. We first show that both Always-private-owned enterprises, or Always-POEs, and Always-SOEs benefit from marked agglomeration effects, highlighting the extensive influence of urban concentration. However, the positive selection effects are present only among Always-POEs; privatized firms only marginally benefited from selection effects after SOE privatization. Moreover, while proximity to the government may be advantageous for improving productivity during their state-owned tenure, it can become an inhibitor after privatization.

Suggested Citation

  • Yikai Zhao & Jun Nagayasu, 2023. "Agglomeration and Selection Effects in Privatized-SOEs: The Role of SOE Reforms," DSSR Discussion Papers 137, Graduate School of Economics and Management, Tohoku University.
    • Handle: RePEc:toh:dssraa:137
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    3. Saul Estrin & Adeline Pelletier, 2018. "Privatization in Developing Countries: What Are the Lessons of Recent Experience?," The World Bank Research Observer, World Bank, vol. 33(1), pages 65-102.
    4. Hu, Cui & Xu, Zhaoyuan & Yashiro, Naomitsu, 2015. "Agglomeration and productivity in China: Firm level evidence," China Economic Review, Elsevier, vol. 33(C), pages 50-66.
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