RECASTING THE IRON RICE BOWL: THE REFORM OF CHINA’S STATE-OWNED ENTERPRISES

Following the enactment of reforms in the mid-1990s, China’s state-owned enterprises (SOEs) became more profitable. Using theoretical insights from Azmat, Manning, and Van Reenen (2012) and Karabarbounis and Neiman (2014) and econometric methods in De Loecker and Warzynski (2012), this paper finds t...

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Bibliographic Details
Published in:The review of economics and statistics 2017-10, Vol.99 (4), p.735-747
Main Authors: Berkowitz, Daniel, Ma, Hong, Nishioka, Shuichiro
Format: Article
Language:English
Subjects:
Capital
Cost of capital
Elasticity
Enactment
Iron
Pressure
Productivity
Profitability
Public enterprise
Reforms
Rice
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Summary:Following the enactment of reforms in the mid-1990s, China’s state-owned enterprises (SOEs) became more profitable. Using theoretical insights from Azmat, Manning, and Van Reenen (2012) and Karabarbounis and Neiman (2014) and econometric methods in De Loecker and Warzynski (2012), this paper finds that SOE restructuring was nevertheless limited. This is because SOE profitability gains in part reflect that they were under less political pressure to hire excess labor and also their cost of capital fell and their capital-labor elasticity of substitution generally exceeded unity. Moreover, SOE productivity lagged that of foreign and private firms.
ISSN:0034-6535
1530-9142
DOI:10.1162/REST_a_00637