China as a Regulatory State
The Chinese University of Hong Kong (CUHK) - Department of Economics
School of Business, University of Hong Kong
The University of Hong Kong - School of Business
October 9, 2009
BOFIT Discussion Paper No. 17/2009
Market economy models differ in the degree of the power of the government vis-à-vis the market in the economy. Under the classifications set forth by Glaeser and Shleifer (2002, 2003), and Djankov et al. (2003), these market models range from those emphasizing low government intervention in the market (private orderings and private litigation through courts) to those where the state is an active participant (regulatory state). This paper, using data from a survey of 3,073 private enterprises in China, constructs an index to quantify the power of the government vis-à-vis the market. Regional government power is found to vary considerably across China's regions. Notably, enterprises located in regions where government exerts more power in the market perform better, suggesting that the regulatory state model of the market economy is appropriate for China.
Number of Pages in PDF File: 40
Keywords: regulatory state, disorder costs, dictatorship costs, market economy models, China's economic reform
JEL Classification: P30, D02, L25
Date posted: October 19, 2009
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