Privatization and Productivity in China

58 Pages Posted: 29 Nov 2015 Last revised: 28 May 2019

See all articles by Yuyu Chen

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: May 24, 2019

Abstract

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. We address this selection problem by incorporating endogenous ownership changes into a nonparametric estimation method and exploiting a lag structure in the data. 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

Suggested Citation

Chen, Yuyu and Igami, Mitsuru and Sawada, Masayuki and Xiao, Mo, Privatization and Productivity in China (May 24, 2019). 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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