Insecure Property Rights and Government Ownership of Firms

Jiahua Che () and Yingyi Qian

Working Papers from Stanford University, Department of Economics

Abstract: Forthcoming, Quarterly Journal of Economics, May 1998

We develop a theory of the ownership of firms in an environment without secure property rights against state encroachment. "Private ownership" leads to excessive revenue hiding and "state ownership" (i.e., national government ownership) fails to provide incentives for managers and local governments in a credible way. Because "local government ownership" integrates local government activities and business activities, local government may better serve the interests of the national government, and thus local government ownership may credibly limit state predation, increase local public goods provision, and reduce costly revenue hiding. We use our theory to interpret the relative success of local government-owned firms during China's transition to a market economy.

Key Words: Property Rights, Ownership, State Predation, Local Government, Multi-Task, China

Keywords: Property Rights; Ownership; State Predation; Local Government; Multi-Task; China (search for similar items in EconPapers)
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Working Paper: Insecure Property rights and Government Ownership of Firms (1997)
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