Privatization and Productivity in China
57 Pages Posted: 29 Nov 2015 Last revised: 4 Nov 2019
Date Written: October 31, 2019
We study how ownership affects productivity. 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. Because privatization/liquidation takes time to implement, we exploit a lag structure in the timing of ownership changes to address this selection problem. Results suggest private firms are 53% more productive than SOEs on average. This productivity gap is smaller among larger firms and in economically more liberal times and places; it is larger in consumer-facing and high-tech industries.
Keywords: Privatization, Production function, Productivity
JEL Classification: D24, L11, L33, O47, P31
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