Public vs. Private Ownership of Firms: Evidence from Rural China

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Abstract
November 1997, Revised March 1998 (forthcoming, Quarterly Journal of Economics) Why are many of China's successful rural enterprises publically owned by local communities? Using a set of provincial data, we find that the share of community public firms (Township-Village Enterprises, or TVEs) relative to private enterprises is higher where the central government's influence is greater, the community government's power is stronger, and the level of market development is lower. We also find that TVEs help achieve the community government's goals of increasing government revenue, rural non-farm employment, and rural income. However, TVEs do not increase rural income given the levels of non-farm employment and/or local public goods provision, indicating possible inefficiency as compared to private enterprises. Key Words: Ownership, Township-Village Enterprises, Local Government, Institutions, China
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