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Privatization and Productivity in China

43 Pages Posted: 29 Nov 2015 Last revised: 10 Mar 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: March 8, 2017

Abstract

Privatization of state-owned enterprises (SOEs) since the late 1990s has been credited for China's productivity growth, but the literature has not formally incorporated privatization and it productivity dynamics. We augment Ackerberg, Caves, and Frazer's (2015) model to estimate the TFP impacts of ownership types while allowing for flexible transition dynamics. Results suggest private firms are 192% more efficient than SOEs in the long run. Privatized SOEs do not achieve this gain overnight but close most of the gap within six years on average. We also find the private TFP premium is larger in the final-good sector than in "strategic" (i.e., heavily regulated) industries including petroleum, metals, and car manufacturing.

Keywords: Privatization, Productivity, Transition Economy

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 (March 8, 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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