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Privatization and productivity in China
Author(s) -
Chen Yuyu,
Igami Mitsuru,
Sawada Masayuki,
Xiao Mo
Publication year - 2021
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12395
Subject(s) - productivity , china , state ownership , government (linguistics) , production (economics) , context (archaeology) , business , function (biology) , market economy , economics , industrial organization , emerging markets , microeconomics , finance , economic growth , paleontology , linguistics , philosophy , evolutionary biology , political science , law , biology
We study how ownership affects productivity in the context of China's privatization of state‐owned enterprises (SOEs). Its true impact remains unclear and controversial, partly because the government selectively privatized or liquidated nonperforming SOEs. To address this selection problem, we augment the Gandhi–Navarro–Rivers nonparametric production function to incorporate endogenous ownership changes. Results suggest private firms are 53% more productive than SOEs on average, but the benefits of privatization take several years to fully materialize. 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.