Privatization and Productivity in China
48 Pages Posted: 29 Nov 2015 Last revised: 22 Sep 2017
Date Written: September 22, 2017
We study the impact of privatization in China, which has been credited for part of the country's productivity growth. Because privatization involves political processes, self-selection and unobserved heterogeneity create endogeneity problems, which we address by augmenting the nonparametric approach of Gandhi, Navarro, and Rivers (2016) to incorporate firms' ownership types and their endogenous changes. Results suggest the average short-run and long-run gains from privatization are 43% and 92%, respectively, and are larger in consumer-good industries than capital-good ones. By contrast, new-product surveys and patent statistics show state-owned enterprises outperform private firms, highlighting curious heterogeneity in the capabilities and/or incentives to innovate.
Keywords: Nonparametric identification, Privatization, Productivity
JEL Classification: D24, L11, L33, O31, O47
Suggested Citation: Suggested Citation