Property Rights, Endowment Structure and Reforms of Large SOEs in China-a Nash Bargaining Approach

50 Pages Posted: 13 Dec 2016 Last revised: 14 Aug 2019

See all articles by Xiaojie Liu

Xiaojie Liu

Institut d'Etudes Politiques de Paris (Sciences Po), Department of Economics, Students; Fudan University - Department of Electronic Engineering

Jim Huangnan Shen

University of London, School of Oriental and African Studies (SOAS), Economics; Center for International Development, Harvard Kennedy School, Harvard University

Kent Deng

London School of Economics & Political Science (LSE) - Department of Economic History

Date Written: December 12, 2016

Abstract

Unlike the narrow approach currently prevailing in the literature, this paper proposes a Nash bargaining model to explore an optimal strategy for state-owned enterprise (SOE) reforms in China. We argue that ceteris paribus the current illnesses of low efficiency and rent-seeking commonly suffered by China’s state-owned sector can be cured by a two-pronged strategy in which the intertwining between property rights and endowment allocation, which depends on bargaining between the principal (state) and the agent (SOE managers). This study regards ‘social-extra policy burdens’ as the main obstacle to efficiency improvement in the state sector. For this end, we identify two ‘Ownership Reform Indifference Points’ in the commonly known choices of institutional changes in a reforming Soviet economy to make it more efficient with a joint-stock reform and then to become Pareto optimal under the full privatization.

Keywords: Nash bargaining, state-owned enterprises reforms, property rights, endowment allocation, reforms, privatization, social policy burdens

JEL Classification: D86, L13, P20, P26, P31

Suggested Citation

Liu, Xiaojie and Shen, Jim Huangnan and Deng, Kent, Property Rights, Endowment Structure and Reforms of Large SOEs in China-a Nash Bargaining Approach (December 12, 2016). Available at SSRN: https://ssrn.com/abstract=2884174 or http://dx.doi.org/10.2139/ssrn.2884174

Xiaojie Liu

Institut d'Etudes Politiques de Paris (Sciences Po), Department of Economics, Students ( email )

28 rue des Saints Pères
Paris, 75007
France

Fudan University - Department of Electronic Engineering ( email )

220 Handan Rd
Shanghai Shi, 200433
China

Jim Huangnan Shen (Contact Author)

University of London, School of Oriental and African Studies (SOAS), Economics ( email )

London, WC1E 7HU
United Kingdom

Center for International Development, Harvard Kennedy School, Harvard University ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Kent Deng

London School of Economics & Political Science (LSE) - Department of Economic History ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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