Insider Control vs. Government Control: A Study of China's State Enterprise Reform
نویسندگان
چکیده
This paper examines the costs and bene ̄ts of government control of enterprises in transition, using a large survey of Chinese state enterprises. We ̄nd that tighter government control causes more unpro ̄table production and more surplus employment and thus tends to distort more severely enterprises' economic decisions. However, tighter government control also tends to reduce agency costs by forcing enterprise managers to cut wage and bonus when enterprise performance is poor. On net, government control seems to hinder enterprise e± ciency. But control by lower level governments seems to be less e± ciency-decreasing than by their higher level counterparts. JEL Classi ̄cation Code: D24, D29, O47, P00, P3.
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