Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 30: Efficiency, Technical Progress, and Best Practice in Chinese State Enterprises (1980-1994)

Jinghai Zheng, Xiaxuan Liu and Arne Bigsten
Additional contact information
Jinghai Zheng: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Department of Economics., School of Economics and Commercial Law, Göteborg University, Box 640, SE 405 30 GÖTEBORG
Xiaxuan Liu: Institute of Economics, Postal: Chinese Academy of Social Sciences , Beijing 100836, P.R. China
Arne Bigsten: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Department of Economics., School of Economics and Commercial Law, Göteborg University, Box 640, SE 405 30 GÖTEBORG,

Abstract: In spite of rapid economic growth and swift structural change during the last two decades, China’s industrial reform is far from complete, especially with regard to state enterprises (SOEs). Although troubled with huge financial losses, heavy debt, and substantial over-staffing, SOEs will continue to play a crucial part in the government policy to maintain social stability and economic growth in China. This study, based on samples of about 700 state enterprises during 1980-94, investigates productivity performance of the SOEs using Data Envelopment Analysis and Malmquist Index. Our empirical results show that average technical efficiency had been low among the sample SOEs. Considerable productivity growth was found, but it was mainly accomplished through technical progress rather than efficiency improvement. Regression analyses indicate that wage incentives and education had positive impacts on productivity growth, while large scale was an important determinant of whether an SOE was applying best practice technology. It is also shown that large SOEs were more likely to generate technical progress. These findings are consistent with the industrial structural adjustment program initiated by the government in 1994, which has focused on improving productive efficiency via redundancies and technology upgrading, and on building its best SOEs into conglomerates.

Keywords: Efficiency; productivity; technical progress; state enterprises; reform

JEL-codes: D20; P20

28 pages, September 27, 2000

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Published as
Jinghai Zheng, Xiaxuan Liu and Arne Bigsten, (1998), 'Ownership Structure and Determinants of Technical Efficiency: An Application of Data Envelopment Analysis to Chinese Enterprises (1986-1990)', Journal of Comparative Economics, vol 26, no 3, pages 465-484

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