Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China

49 Pages Posted: 9 Mar 2015 Last revised: 26 May 2022

See all articles by Chang-Tai Hsieh

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Zheng Michael Song

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: March 2015

Abstract

Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state also created many new and large firms. We use detailed firm-level data to show that from 1998 to 2007, (i) state-owned firms that were closed were smaller and had low labor and capital productivity; (ii) the labor productivity of state-owned firms converged to that of private firms; (iii) the capital productivity of state-owned firms remained significantly lower than that of private firms; and (iv) total factor productivity (TFP) growth of state-owned firms was faster than that of private firms. We find the reforms of the state sector were responsible for 20 percent of aggregate TFP growth from 1998 to 2007.

Suggested Citation

Hsieh, Chang-Tai and Song, Zheng Michael, Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China (March 2015). NBER Working Paper No. w21006, Available at SSRN: https://ssrn.com/abstract=2575491

Chang-Tai Hsieh (Contact Author)

University of Chicago - Booth School of Business ( email )

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University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Zheng Michael Song

University of Chicago ( email )

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