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China as a Regulatory State

40 Pages Posted: 19 Oct 2009  

Julan Du

The Chinese University of Hong Kong (CUHK) - Department of Economics

Yi Lu

School of Business, University of Hong Kong

Zhigang Tao

The University of Hong Kong - School of Business

Date Written: October 9, 2009

Abstract

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.

Keywords: regulatory state, disorder costs, dictatorship costs, market economy models, China's economic reform

JEL Classification: P30, D02, L25

Suggested Citation

Du, Julan and Lu, Yi and Tao, Zhigang, China as a Regulatory State (October 9, 2009). BOFIT Discussion Paper No. 17/2009. Available at SSRN: https://ssrn.com/abstract=1489412 or http://dx.doi.org/10.2139/ssrn.1489412

Julan Du (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Yi Lu

School of Business, University of Hong Kong ( email )

Rm 730, Meng Wah Complex
Pokfulam Road
Hong Kong
Hong Kong
(852) 2241-5245 (Phone)
(852) 2858-5614 (Fax)

HOME PAGE: http://www.fbe.hku.hk/~luyi

Zhigang Tao

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

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