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...

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Main Authors:	Huang, Zhangkai, Liu, Jinyu, Ma, Guangrong, Xu, Lixin Colin
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	PRIVATIZATION POLITICIANS CAREER CONCERN PRODUCTIVITY STATE-OWNED ENTERPRISES ECONOMIC TAKEOFF
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

id	okr-10986-33845
recordtype	oai_dc
spelling	okr-10986-338452022-09-20T00:11:24Z The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern Huang, Zhangkai Liu, Jinyu Ma, Guangrong Xu, Lixin Colin PRIVATIZATION POLITICIANS CAREER CONCERN PRODUCTIVITY STATE-OWNED ENTERPRISES ECONOMIC TAKEOFF 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. 2020-06-04T13:57:29Z 2020-06-04T13:57:29Z 2020-05 Working Paper 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 English Policy Research Working Paper;No. 9261 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
topic	PRIVATIZATION POLITICIANS CAREER CONCERN PRODUCTIVITY STATE-OWNED ENTERPRISES ECONOMIC TAKEOFF
spellingShingle	PRIVATIZATION POLITICIANS CAREER CONCERN PRODUCTIVITY STATE-OWNED ENTERPRISES ECONOMIC TAKEOFF Huang, Zhangkai Liu, Jinyu Ma, Guangrong Xu, Lixin Colin The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
geographic_facet	East Asia and Pacific China
relation	Policy Research Working Paper;No. 9261
description	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.
format	Working Paper
author	Huang, Zhangkai Liu, Jinyu Ma, Guangrong Xu, Lixin Colin
author_facet	Huang, Zhangkai Liu, Jinyu Ma, Guangrong Xu, Lixin Colin
author_sort	Huang, Zhangkai
title	The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
title_short	The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
title_full	The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
title_fullStr	The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
title_full_unstemmed	The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern
title_sort	transformative effects of privatization in china : a natural experiment based on politician career concern
publisher	World Bank, Washington, DC
publishDate	2020
url	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
_version_	1764479643330543616

The Transformative Effects of Privatization in China : A Natural Experiment Based on Politician Career Concern

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