Privatization and Productivity in China

52 Pages Posted: 29 Nov 2015 Last revised: 28 Oct 2018

See all articles by Yuyu Chen

Yuyu Chen

Peking University - Guanghua School of Management

Mitsuru Igami

Yale University - Department of Economics ; Yale University - Cowles Foundation

Masayuki Sawada

Yale University - Department of Economics

Mo Xiao

University of Arizona - Eller College of Management - Department of Economics

Date Written: October 26, 2018

Abstract

We study how changes in ownership affect the productivity of firms. Privatization of state-owned enterprises (SOEs) was a major economic reform during China's rapid growth, but its true impact remains controversial. Although private firms seem more productive than SOEs, the government selectively privatized (or liquidated) non-performing SOEs, which complicates the measurement of productivity. We address this selection problem by incorporating endogenous ownership change into a nonparametric estimation method and exploiting a lag structure in data. Results suggest privatization conferred both short-run and long-run productivity gains. The private-SOE productivity gap is larger among older firms and in less economically liberal regions.

Keywords: Nonparametric identification, Privatization, Productivity

JEL Classification: D24, L11, L33, O47, P31

Suggested Citation

Chen, Yuyu and Igami, Mitsuru and Sawada, Masayuki and Xiao, Mo, Privatization and Productivity in China (October 26, 2018). Available at SSRN: https://ssrn.com/abstract=2695933 or http://dx.doi.org/10.2139/ssrn.2695933

Yuyu Chen

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Mitsuru Igami (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Masayuki Sawada

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Mo Xiao

University of Arizona - Eller College of Management - Department of Economics ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

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