Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China

Hayek argues that local knowledge is a key for understanding whether production should be decentralized. This paper tests Hayek’s predictions by examining the causes of the Chinese government’s decision to decentralize state-owned enterprises. Sinc...

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Main Authors:	Huang, Zhangkai, Li, Lixing, Ma, Guangrong, Xu, Lixin Colin
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	CAPITALS EMPLOYMENT UNEMPLOYMENT RATES CHECKS ACCOUNTING INTANGIBLE ASSETS CONFLICT OF INTEREST STOCK INFORMATION TECHNOLOGY AUTONOMY INFORMATION SYSTEM INTEREST DEPRECIATION DUMMY VARIABLES PRIVATIZATION INDUSTRY REMITTANCE PROPERTY RIGHTS EXCHANGE OPTION LOCAL GOVERNMENTS GDP PER CAPITA ELASTICITY PLANNED ECONOMY POLITICAL ECONOMY REVENUES PORTFOLIO INCENTIVES VARIABLES TIME CONSTRAINTS CAPITAL STOCK TAX PRIVATE PROPERTY INPUTS OWNERSHIP CITIES INCOME TAX DUMMY VARIABLE BANKRUPTCY OVERSIGHT INTERNATIONAL BANK PENSION INFORMATION ASYMMETRIES SMALL BUSINESS INFLUENCE TOTAL FACTOR PRODUCTIVITY COLLUSION INVESTMENT ALLOCATION ORGANIZATIONAL FORM COSTS TRANSPORT FINANCIAL STUDIES PORTFOLIOS CORPORATE INCOME TAXES PRODUCTIVITY ECONOMETRICS MIGRATION MUNICIPAL GOVERNMENTS CENTRALIZATION MARKETS AGENCY PROBLEMS LOCAL GOVERNMENT RETURN PUBLIC FINANCE LABOR TAX REVENUES ENTERPRISES ELASTICITY OF SUBSTITUTION INVENTORY SUBSIDIES FINANCE ECONOMIC RESEARCH INFRASTRUCTURE TAXES BANKS INFORMATION ASYMMETRY EXPENDITURE UNEMPLOYMENT EQUITY INCOME TAXES EXTERNALITY VALUE ADDED GOOD CAPITAL DEFLATORS UNEMPLOYMENT RATE VALUE SMALL BUSINESS LENDING MOBILE PHONE COMPETITIVENESS FISCAL CONDITIONS RETURNS FISCAL BURDEN CONFLICTS OF INTEREST FIXED CAPITAL FIXED INVESTMENT KNOWLEDGE ECONOMY PROPERTY ORGANIZATIONAL STRUCTURE FIRM PERFORMANCE SHARES ASSETS DEFAULT MARKET TAX SHARING PRODUCTION FUNCTION ECONOMIC SYSTEMS MARKET COMPETITION PREFECTURES FISCAL AUTONOMY GDP SECURITY INTANGIBLE GROWTH RATE INVESTMENT SHARE COMPARATIVE ADVANTAGE FISCAL REFORM FINANCIAL MARKETS FISCAL BURDENS DECENTRALIZATION REVENUE PROFIT FINANCIAL SUPPORT INVESTMENTS LENDING CHECK TRANSITION ECONOMIES INSTRUMENT GOVERNMENTS LIABILITIES POSITIVE EFFECTS MUNICIPAL CASH FLOW INCOME LEVEL DEVELOPMENT POLICY
Online Access:	http://documents.worldbank.org/curated/en/2015/06/24680786/hayek-local-information-decentralization-state-owned-enterprises-china http://hdl.handle.net/10986/22198

id	okr-10986-22198
recordtype	oai_dc
spelling	okr-10986-221982021-04-23T14:04:07Z Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China Huang, Zhangkai Li, Lixing Ma, Guangrong Xu, Lixin Colin CAPITALS EMPLOYMENT UNEMPLOYMENT RATES CHECKS ACCOUNTING INTANGIBLE ASSETS CONFLICT OF INTEREST STOCK INFORMATION TECHNOLOGY AUTONOMY INFORMATION SYSTEM INTEREST DEPRECIATION DUMMY VARIABLES PRIVATIZATION INDUSTRY REMITTANCE PROPERTY RIGHTS EXCHANGE OPTION LOCAL GOVERNMENTS GDP PER CAPITA ELASTICITY PLANNED ECONOMY POLITICAL ECONOMY REVENUES PORTFOLIO INCENTIVES VARIABLES TIME CONSTRAINTS CAPITAL STOCK TAX PRIVATE PROPERTY INPUTS OWNERSHIP CITIES INCOME TAX DUMMY VARIABLE BANKRUPTCY OVERSIGHT INTERNATIONAL BANK PENSION INFORMATION ASYMMETRIES SMALL BUSINESS INFLUENCE TOTAL FACTOR PRODUCTIVITY COLLUSION INVESTMENT ALLOCATION ORGANIZATIONAL FORM COSTS TRANSPORT FINANCIAL STUDIES PORTFOLIOS CORPORATE INCOME TAXES PRODUCTIVITY ECONOMETRICS MIGRATION MUNICIPAL GOVERNMENTS CENTRALIZATION MARKETS AGENCY PROBLEMS LOCAL GOVERNMENT RETURN PUBLIC FINANCE LABOR TAX REVENUES ENTERPRISES ELASTICITY OF SUBSTITUTION INVENTORY SUBSIDIES FINANCE ECONOMIC RESEARCH INFRASTRUCTURE TAXES BANKS INFORMATION ASYMMETRY EXPENDITURE UNEMPLOYMENT EQUITY INCOME TAXES EXTERNALITY VALUE ADDED GOOD CAPITAL DEFLATORS UNEMPLOYMENT RATE VALUE SMALL BUSINESS LENDING MOBILE PHONE COMPETITIVENESS FISCAL CONDITIONS RETURNS FISCAL BURDEN CONFLICTS OF INTEREST FIXED CAPITAL FIXED INVESTMENT KNOWLEDGE ECONOMY PROPERTY ORGANIZATIONAL STRUCTURE FIRM PERFORMANCE SHARES ASSETS DEFAULT MARKET TAX SHARING PRODUCTION FUNCTION ECONOMIC SYSTEMS MARKET COMPETITION PREFECTURES FISCAL AUTONOMY GDP SECURITY INTANGIBLE GROWTH RATE INVESTMENT SHARE COMPARATIVE ADVANTAGE FISCAL REFORM FINANCIAL MARKETS FISCAL BURDENS DECENTRALIZATION REVENUE PROFIT FINANCIAL SUPPORT INVESTMENTS LENDING CHECK TRANSITION ECONOMIES INSTRUMENT GOVERNMENTS LIABILITIES POSITIVE EFFECTS MUNICIPAL CASH FLOW INCOME LEVEL DEVELOPMENT POLICY Hayek argues that local knowledge is a key for understanding whether production should be decentralized. This paper tests Hayek’s predictions by examining the causes of the Chinese government’s decision to decentralize state-owned enterprises. Since the government located closer to a state-owned enterprise has more information over that enterprise, a greater distance between the government and the enterprise should lead to a higher likelihood of decentralization. Moreover, where communication costs and the government’s uncertainty over an enterprise’s performance are greater, the government is more likely to decentralize enterprises so that it can better utilize local information. This paper finds empirical support for these implications. 2015-07-17T15:07:02Z 2015-07-17T15:07:02Z 2015-06 Working Paper http://documents.worldbank.org/curated/en/2015/06/24680786/hayek-local-information-decentralization-state-owned-enterprises-china http://hdl.handle.net/10986/22198 English en_US Policy Research Working Paper;No. 7321 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper East Asia and Pacific China
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	CAPITALS EMPLOYMENT UNEMPLOYMENT RATES CHECKS ACCOUNTING INTANGIBLE ASSETS CONFLICT OF INTEREST STOCK INFORMATION TECHNOLOGY AUTONOMY INFORMATION SYSTEM INTEREST DEPRECIATION DUMMY VARIABLES PRIVATIZATION INDUSTRY REMITTANCE PROPERTY RIGHTS EXCHANGE OPTION LOCAL GOVERNMENTS GDP PER CAPITA ELASTICITY PLANNED ECONOMY POLITICAL ECONOMY REVENUES PORTFOLIO INCENTIVES VARIABLES TIME CONSTRAINTS CAPITAL STOCK TAX PRIVATE PROPERTY INPUTS OWNERSHIP CITIES INCOME TAX DUMMY VARIABLE BANKRUPTCY OVERSIGHT INTERNATIONAL BANK PENSION INFORMATION ASYMMETRIES SMALL BUSINESS INFLUENCE TOTAL FACTOR PRODUCTIVITY COLLUSION INVESTMENT ALLOCATION ORGANIZATIONAL FORM COSTS TRANSPORT FINANCIAL STUDIES PORTFOLIOS CORPORATE INCOME TAXES PRODUCTIVITY ECONOMETRICS MIGRATION MUNICIPAL GOVERNMENTS CENTRALIZATION MARKETS AGENCY PROBLEMS LOCAL GOVERNMENT RETURN PUBLIC FINANCE LABOR TAX REVENUES ENTERPRISES ELASTICITY OF SUBSTITUTION INVENTORY SUBSIDIES FINANCE ECONOMIC RESEARCH INFRASTRUCTURE TAXES BANKS INFORMATION ASYMMETRY EXPENDITURE UNEMPLOYMENT EQUITY INCOME TAXES EXTERNALITY VALUE ADDED GOOD CAPITAL DEFLATORS UNEMPLOYMENT RATE VALUE SMALL BUSINESS LENDING MOBILE PHONE COMPETITIVENESS FISCAL CONDITIONS RETURNS FISCAL BURDEN CONFLICTS OF INTEREST FIXED CAPITAL FIXED INVESTMENT KNOWLEDGE ECONOMY PROPERTY ORGANIZATIONAL STRUCTURE FIRM PERFORMANCE SHARES ASSETS DEFAULT MARKET TAX SHARING PRODUCTION FUNCTION ECONOMIC SYSTEMS MARKET COMPETITION PREFECTURES FISCAL AUTONOMY GDP SECURITY INTANGIBLE GROWTH RATE INVESTMENT SHARE COMPARATIVE ADVANTAGE FISCAL REFORM FINANCIAL MARKETS FISCAL BURDENS DECENTRALIZATION REVENUE PROFIT FINANCIAL SUPPORT INVESTMENTS LENDING CHECK TRANSITION ECONOMIES INSTRUMENT GOVERNMENTS LIABILITIES POSITIVE EFFECTS MUNICIPAL CASH FLOW INCOME LEVEL DEVELOPMENT POLICY
spellingShingle	CAPITALS EMPLOYMENT UNEMPLOYMENT RATES CHECKS ACCOUNTING INTANGIBLE ASSETS CONFLICT OF INTEREST STOCK INFORMATION TECHNOLOGY AUTONOMY INFORMATION SYSTEM INTEREST DEPRECIATION DUMMY VARIABLES PRIVATIZATION INDUSTRY REMITTANCE PROPERTY RIGHTS EXCHANGE OPTION LOCAL GOVERNMENTS GDP PER CAPITA ELASTICITY PLANNED ECONOMY POLITICAL ECONOMY REVENUES PORTFOLIO INCENTIVES VARIABLES TIME CONSTRAINTS CAPITAL STOCK TAX PRIVATE PROPERTY INPUTS OWNERSHIP CITIES INCOME TAX DUMMY VARIABLE BANKRUPTCY OVERSIGHT INTERNATIONAL BANK PENSION INFORMATION ASYMMETRIES SMALL BUSINESS INFLUENCE TOTAL FACTOR PRODUCTIVITY COLLUSION INVESTMENT ALLOCATION ORGANIZATIONAL FORM COSTS TRANSPORT FINANCIAL STUDIES PORTFOLIOS CORPORATE INCOME TAXES PRODUCTIVITY ECONOMETRICS MIGRATION MUNICIPAL GOVERNMENTS CENTRALIZATION MARKETS AGENCY PROBLEMS LOCAL GOVERNMENT RETURN PUBLIC FINANCE LABOR TAX REVENUES ENTERPRISES ELASTICITY OF SUBSTITUTION INVENTORY SUBSIDIES FINANCE ECONOMIC RESEARCH INFRASTRUCTURE TAXES BANKS INFORMATION ASYMMETRY EXPENDITURE UNEMPLOYMENT EQUITY INCOME TAXES EXTERNALITY VALUE ADDED GOOD CAPITAL DEFLATORS UNEMPLOYMENT RATE VALUE SMALL BUSINESS LENDING MOBILE PHONE COMPETITIVENESS FISCAL CONDITIONS RETURNS FISCAL BURDEN CONFLICTS OF INTEREST FIXED CAPITAL FIXED INVESTMENT KNOWLEDGE ECONOMY PROPERTY ORGANIZATIONAL STRUCTURE FIRM PERFORMANCE SHARES ASSETS DEFAULT MARKET TAX SHARING PRODUCTION FUNCTION ECONOMIC SYSTEMS MARKET COMPETITION PREFECTURES FISCAL AUTONOMY GDP SECURITY INTANGIBLE GROWTH RATE INVESTMENT SHARE COMPARATIVE ADVANTAGE FISCAL REFORM FINANCIAL MARKETS FISCAL BURDENS DECENTRALIZATION REVENUE PROFIT FINANCIAL SUPPORT INVESTMENTS LENDING CHECK TRANSITION ECONOMIES INSTRUMENT GOVERNMENTS LIABILITIES POSITIVE EFFECTS MUNICIPAL CASH FLOW INCOME LEVEL DEVELOPMENT POLICY Huang, Zhangkai Li, Lixing Ma, Guangrong Xu, Lixin Colin Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China
geographic_facet	East Asia and Pacific China
relation	Policy Research Working Paper;No. 7321
description	Hayek argues that local knowledge is a key for understanding whether production should be decentralized. This paper tests Hayek’s predictions by examining the causes of the Chinese government’s decision to decentralize state-owned enterprises. Since the government located closer to a state-owned enterprise has more information over that enterprise, a greater distance between the government and the enterprise should lead to a higher likelihood of decentralization. Moreover, where communication costs and the government’s uncertainty over an enterprise’s performance are greater, the government is more likely to decentralize enterprises so that it can better utilize local information. This paper finds empirical support for these implications.
format	Working Paper
author	Huang, Zhangkai Li, Lixing Ma, Guangrong Xu, Lixin Colin
author_facet	Huang, Zhangkai Li, Lixing Ma, Guangrong Xu, Lixin Colin
author_sort	Huang, Zhangkai
title	Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China
title_short	Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China
title_full	Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China
title_fullStr	Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China
title_full_unstemmed	Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China
title_sort	hayek, local information, and the decentralization of state-owned enterprises in china
publisher	World Bank, Washington, DC
publishDate	2015
url	http://documents.worldbank.org/curated/en/2015/06/24680786/hayek-local-information-decentralization-state-owned-enterprises-china http://hdl.handle.net/10986/22198
_version_	1764450404130619392

Hayek, Local Information, and the Decentralization of State-Owned Enterprises in China

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