Trade liberalization and decentralization of state‐owned enterprises: Evidence from China

Haichao Fan, Cui Hu, Faqin Lin and Huanhuan Wang

Economic Inquiry, 2022, vol. 60, issue 1, 224-246

Abstract: This paper examines the relationship between trade liberalization and the probability of state‐owned enterprises (SOEs) being decentralized. We find that tariff cuts for inputs significantly lower the probability of a SOE being decentralized, whereas tariff cuts for outputs raise this probability. We also find that as the distance from a SOE to its overseeing government increases, the effects of input and output tariff cuts on the probability of SOEs decentralization become stronger. Our empirical results are consistent with a simple model in which local governments try to balance the costs of supervising SOEs against the profits extracted from SOEs.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:60:y:2022:i:1:p:224-246

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