Determinants of Privatization in China: The Role of the Presence of Foreign Firms

Posted: 16 Nov 2015

See all articles by Yi Liu

Yi Liu

College of Economics and Trade @ Hunan University

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Xue Li

Hunan University

Date Written: November 16, 2015

Abstract

This paper investigates the role of the presence of foreign firms in a sector in influencing the privatization policy for domestic firms in that sector in China. We consider several variables to proxy for such presence, from the perspective of relative production scale, research and development & marketing and labor productivity. Using the Enterprise Surveys by the World Bank in 2005 of nearly ten thousand Chinese firms located over 100 cities, we find that foreign firm presence affects the extent of private ownership of domestic firms in that sector in a non-linear fashion. Additionally, we apply Tobit estimation with lagged key variables and IV-Tobit estimation to deal with possible endogeneity in the relationship between foreign presence and privatization decision.

Keywords: Privatization, Foreign Presence, China, Endogeneity

JEL Classification: D21, D43, D69, O53

Suggested Citation

Liu, Yi and Lahiri, Sajal and Li, Xue, Determinants of Privatization in China: The Role of the Presence of Foreign Firms (November 16, 2015). Available at SSRN: https://ssrn.com/abstract=2691202 or http://dx.doi.org/10.2139/ssrn.2691202

Yi Liu (Contact Author)

College of Economics and Trade @ Hunan University ( email )

China

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

Xue Li

Hunan University ( email )

2 Lushan South Rd
Changsha, Hunan 410082
China

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