The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
The serious implications of privatizing state-owned enterprises for politicians, managers, and investors make such decisions highly contingent on firm characteristics and past performance, complicating the identification of the privatization effect...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/684771590713191603/The-Transformative-Effects-of-Privatization-in-China-A-Natural-Experiment-Based-on-Politician-Career-Concern http://hdl.handle.net/10986/33845 |
| Summary: | The serious implications of privatizing
state-owned enterprises for politicians, managers, and
investors make such decisions highly contingent on firm
characteristics and past performance, complicating the
identification of the privatization effects. A unique
opportunity for this identification arises from a rule of
promotion of local politicians based on age requirements in
China. This paper finds that Chinese cities whose top
officials were older than age 58 were 20 percent less likely
to privatize local state-owned enterprises during the wave
of state-owned enterprise restructuring starting in the late
1990s. Relying on the regression discontinuity design, the
analysis finds that privatizations led to productivity gains
of more than 170 percent, an order of magnitude larger than
the traditional estimates based on the firm fixed effect
specification (including its random-growth variant). The
paper further finds that the privatization effects are
significantly larger when the government is less involved in
the affairs of local firms. The findings underscore the need
to deal with the time-varying selectivity of privatizations
and highlight the crucial role that state-owned enterprise
privatizations played in China's economic takeoff. |
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