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Effects of Privatization on Exporting Decisions: Firm-level Evidence from Chinese State-owned Enterprises

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Abstract

This paper examines whether privatizing Chinese state-owned enterprises increases the probability of exporting and, if so, what factors generate such an effect. Using firm-level data for the Chinese manufacturing sector for the 2000–2007 period, we find that privatization positively affects a firm’s productivity, size, and decision to export, whereas we find that it negatively affects the level of a firm’s long-term debt. We also find that Chinese firms are more likely to export when the productivity level, firm size, or the level of long-term debt increases. Taken together, these two sets of results suggest that privatization positively affects the likelihood that a firm will export by improving productivity and increasing firm size, whereas it negatively affects such a likelihood by lowering the long-term debt level of the firm. However, a quantitative analysis reveals that the effects of privatization that occur through these three channels are only slight. Therefore, we conclude that the positive effect of privatization on the likelihood of exporting is mainly the result of unobservable factors that are most likely related to changes in attitude about the profits and risks associated with privatization.

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Notes

  1. Greenaway et al. (2007), Du and Girma (2007), Muuls (2008), and Feenstra et al. (2011) also examined whether the financial conditions of firms affect the decision to export using data for non-transition economies.

  2. Other methods that estimate ATT include Mahalanobis-metric matching (Rubin, 1980) and weighting by the inversed propensity score (Hirano et al., 2003). This study employs PSM because it is more widely used in the literature.

  3. These deflators are available at http://www.econ.kuleuven.be/public/n07057/China/.

  4. When labor productivity is used, the main results do not change.

  5. When we define the state-ownership ratio as the share of the sum of state capital and collective capital or as the sum of state capital and legal capital, the main results do not change qualitatively and are similar quantitatively.

  6. This refers to firms that did not export in 2000 but exported in 2001.

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Acknowledgements

This research was conducted as part of a project on ‘Firm-Level Productivity in East Asia’ that was undertaken at the Research Institute of Economy, Trade and Industry. Part of this research was conducted in a project on the ‘Analysis on the Determinants of East Asian Firms’ International Competitiveness’ undertaken at the Economic and Social Research Institute (ESRI), Cabinet Office, the Government of Japan. The authors would like to thank RIETI for financial support and the Ministry of Economy, Trade and Industry (METI) for providing the firm-level data sets for Japan. Inui and Todo also acknowledge financial support by Grants-in-Aid for Scientific Research (A) from Japan Society for the Promotion of Science. The opinions expressed and arguments employed in this paper are the sole responsibility of the authors and do not necessarily reflect those of RIETI, METI, ESRI, the Cabinet Office of Japan, or any institution with which the authors are affiliated.

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Authors and Affiliations

  1. Graduate School of Frontier Sciences, The University of Tokyo, 5-1-5 Kashiwanoha, Kashiwa Chiba, 277-8563, Japan

    Yasuyuki Todo

  2. College of Economics, Nihon University, 1-3-2 Misakicho, Tokyo, 101-8360, Chiyada-ku, Japan

    Tomohiko Inui

  3. Waseda Institute for Advanced Study, Waseda University, 1-104 Todukacho, Tokyo, 169-8050, Shinjuku-ku, Japan

    Yuan Yuan

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  1. Yasuyuki Todo
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  2. Tomohiko Inui
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Todo, Y., Inui, T. & Yuan, Y. Effects of Privatization on Exporting Decisions: Firm-level Evidence from Chinese State-owned Enterprises. Comp Econ Stud 56, 536–555 (2014). https://doi.org/10.1057/ces.2014.13

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