Determinants of Privatization in China: The Role of the Presence of Foreign Firms
Posted: 16 Nov 2015
Date Written: November 16, 2015
Abstract
This paper investigates the role of the presence of foreign firms in a sector in influencing the privatization policy for domestic firms in that sector in China. We consider several variables to proxy for such presence, from the perspective of relative production scale, research and development & marketing and labor productivity. Using the Enterprise Surveys by the World Bank in 2005 of nearly ten thousand Chinese firms located over 100 cities, we find that foreign firm presence affects the extent of private ownership of domestic firms in that sector in a non-linear fashion. Additionally, we apply Tobit estimation with lagged key variables and IV-Tobit estimation to deal with possible endogeneity in the relationship between foreign presence and privatization decision.
Keywords: Privatization, Foreign Presence, China, Endogeneity
JEL Classification: D21, D43, D69, O53
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