Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/52753 
Authors: 
Year of Publication: 
2002
Series/Report no.: 
WIDER Discussion Paper No. 2002/13
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
I present a study of ownership of firms under government rent seeking. Using its control of regulated inputs, a government agency extracts rents from a manager who undertakes an investment. Such a government rent seeking activity leads to a typical hold-up problem. Government ownership is shown to serve as a second best commitment mechanism through which the government agency will restrain itself from the rent seeking activity and even offer the manager support and favor such as tax breaks and subsidies. This mechanism works at a cost as government ownership compromises ex post managerial incentives and creates distortion in resource allocation. Nevertheless, government ownership may Pareto dominate private ownership under certain conditions. These conditions correspond to a host of stylized empirical observations concerning local government-owned firms (township-village enterprises) during China’s transition to a market economy.
Subjects: 
ownership of firms
government
rent seeking
township and village enterprises
China
JEL: 
D23
D72
L33
ISBN: 
9291901458
Document Type: 
Working Paper

Files in This Item:
File
Size
149.52 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.