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Privatization and Productivity in China

48 Pages Posted: 29 Nov 2015 Last revised: 22 Sep 2017

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: September 22, 2017

Abstract

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

Chen, Yuyu and Igami, Mitsuru and Sawada, Masayuki and Xiao, Mo, Privatization and Productivity in China (September 22, 2017). 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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