Privatization and Productivity in China
52 Pages Posted: 29 Nov 2015 Last revised: 28 Oct 2018
Date Written: October 26, 2018
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
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