Privatization and Productivity in China
58 Pages Posted: 29 Nov 2015 Last revised: 28 May 2019
Date Written: May 24, 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. 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
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