NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Zheng Michael Song

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Working Papers

March 2015Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China
with Chang-Tai Hsieh: w21006
Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state also created many new and large firms. We use detailed firm-level data to show that from 1998 to 2007, (i) state-owned firms that were closed were smaller and had low labor and capital productivity; (ii) the labor productivity of state-owned firms converged to that of private firms; (iii) the capital productivity of state-owned firms remained significantly lower than that of private firms; and (iv) total factor productivity (TFP) growth of state-owned firms was faster than that of private fir...

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