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MANAGERIAL AUTONOMY, CONTRACTUAL INCENTIVES AND PRODUCTIVITY IN A TRANSITION ECONOMY: SOME EVIDENCE FROM CHINA'S TOWN AND VILLAGE ENTERPRISES
Author(s) -
Cheng Harrison,
Hsiao Cheng,
Nugent Jeffrey B.,
Qiu Jicheng
Publication year - 2006
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2006.00319.x
Subject(s) - incentive , autonomy , china , productivity , economics , profit maximization , profit (economics) , government (linguistics) , market economy , economic system , business , public economics , microeconomics , economic growth , linguistics , philosophy , political science , law
. In advanced industrial economies it is accepted that efficiency requires aligning managerial autonomy in decision‐making with managerial incentives. Should this hold for economies like that of rural China where (at least until very recently) managers might abuse autonomy and government owners may have objectives other than profit maximization? This paper tests for the effects of managerial autonomy on efficiency with and without alignment with incentives in a panel of Chinese town and village enterprises (TVEs). The results show that managerial autonomy has had a positive and significant effect on productivity only when aligned with incentives.