Working Paper: CEPR ID: DP2781
Authors: Chongen Bai; David Li; Zhigang Tao; Yijiang Wang
Abstract: During transition, maintaining employment and providing a social safety net for the unemployed are important to social stability, which in turn is crucial for the productivity of the whole economy. Because independent institutions for social safety are lacking and firms with strong profit incentives have little incentive to promote social stability due to its public good nature, state-owned enterprises (SOEs) are needed to continue their role in providing social welfare. Charged with the multi-tasks of efficient production as well as social welfare provision, SOEs continue to be given low profit incentives and consequently, their financial performance continues to be poor.
Keywords: dual-track reform; multitask; social stability; unemployment
JEL Codes: D21; J23; L20; P20; P23; P31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social stability (I31) | economic performance (P17) |
| low social stability (P37) | maintain SOEs during transition (P31) |
| delaying privatization (L33) | low profit incentives for multitasked SOEs (L39) |
| low profit incentives for multitasked SOEs (L39) | prevent diversion of efforts from social welfare to production (H53) |
| multitasking (J22) | poor financial performance of SOEs (L32) |
| SOE profitability < private firm profitability (P31) | multitasking (J22) |
| higher social stability (P39) | reduce proportion of SOEs (P31) |
| low total factor productivity of SOEs relative to private firms (L32) | reduce proportion of SOEs (P31) |