Grasp the Large, Let Go of the Small:
Transcription
Grasp the Large, Let Go of the Small:
Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China Chang-Tai Hsieh Zheng (Michael) Song Chicago Booth Chicago Booth, December 2, 2013 Conclusion Introduction Facts The Model TFP and Distortions Our Story The State Sector in China Fifteen years ago: A moribund state sector ... Counterfactuals Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals The State Sector in China Fifteen years ago: A moribund state sector ... A decade later: Full of powerful and giant state-owned enterprises (SOEs) Conclusion Introduction Facts The Model TFP and Distortions Our Story Grasp the Large, Let Go of the Small Let Go of the Small Closure and privatization of small SOEs Grasp the Large Corporatization of the remaining SOEs Creating new SOEs Counterfactuals Conclusion Baoshan Iron & Steel in the 1980s Iron & Steel in the 1980s Ministry of y Metallurgical Industry Baoshan Iron & Steel Iron & Steel Baoshan Iron & Steel in the 2000s Iron & Steel in the 2000s Public Listed since 2000 Board of Directors E al ated b SASAC Evaluated by SASAC ……. Corpora za on ≠ Privatization BaoSteel Group Corpora za on ≠ Privatization State Ownership ≠ Monopoly Hebei Steel Beijing Steel Wuhan Steel Jiangsu Steel Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion This Paper We …rst document the facts regarding “Grasping the Large, Letting Go of the Small” in the Chinese industrial sector. We interpret these facts through the lenses of a standard model of monopolistic competition with heterogeneous …rms. Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Main Findings TFP of corporatized and privatized SOEs is converging to that of private …rms. The performances are highly unequal between large and small SOEs. Labor productivity of corporatized and privatized SOEs is also converging to that of private …rms. The gap of capital productivity remains unchanged. Our stories for TFP growth and falling labor distortions Welfare implication: Less clear Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Data Annual Survey of Industries from 1998 through 2007 Cover all industrial …rms identi…ed as SOE or as private …rms with sales above 5 million RMB, which account for above 90% of the total industrial output in China. The survey has 137,716 and 319,183 …rms in 1998 and 2007, respectively. 1998 2007 SOEs Number VA Share 50,615 55% 19,255 34% Introduction Facts The Model TFP and Distortions Our Story Exit Rates: Before and After Annual Exit Rates (%) SOEs Private Firms 1991-1995 0.9 11.6 1998-2007 13.2 12.0 Counterfactuals Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Let Go of the Small: Exit Rates 1998-2007 by Initial Size 40 SOE Priv ate 35 30 25 20 15 10 5 0 10 20 30 40 50 60 70 perc entiles by 1998 v alue-added 80 90 100 Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Size, Labor and Capital Productivity Panel A: Y 1998 0.5 In c . Ex it In c . Ex it 0.4 0.3 SOE SOE Priv a te Priv a te 0.2 0.1 0 -2 10 -1 10 0 10 10 1 10 2 Panel B: Y-L 1998 0.5 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 10 1 10 2 Panel C: Y-K 1998 0.5 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 10 1 10 2 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Incumbent Firms To facilitate comparison, we focus on incumbent …rms observed in both 1998 and 2007. # Corporatized/Privatized SOEs: 7,556/4,952 # Private …rms: 28,128 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Let Go of the Small: Privatization Rates 1998-2007 by Initial Size 50 45 40 35 30 25 20 15 10 5 0 0 10 20 30 40 50 60 70 percentiles by 1998 v alue-added 80 90 100 Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Distributions of the Incumbent Panel A: Y 1998 Panel B: Y 2007 0.5 0.5 Co rp . SOE Pri v . SOE Pri v a te 0.25 0 -2 10 0.25 -1 10 0 1 10 2 10 10 0 -2 10 Panel C : Y-L 1998 0.5 0.25 0.25 0.25 1 4 10 0 0.05 Panel E: Y-K 1998 0.5 0.25 0.25 0.25 1 1 2 10 10 0.25 1 4 10 4 10 Panel F: Y-K 2007 0.5 0 0.05 0 10 Panel D : Y-L 2007 0.5 0 0.05 -1 10 4 10 0 0.05 0.25 1 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Input and Output Growth of the Incumbent Panel A: Employ ment Grow th 5 C orp. SOE Priv . SOE 5 Panel C : Value-Added Grow th 5 0 0 0 -5 -5 -5 -10 Panel B: C apital Grow th -10 -10 0 50 100 0 50 100 0 50 100 per c entiles by 1998 v alue-added per c entiles by 1998 v alue-added per c entiles by 1998 v alue-added Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Entry New …rms: birth year > 1998 and observed in 2007 New corporatized SOEs: 4,224 (26%) New privatized SOEs: 1,238 (15%) New private …rms: 198,204 (68%) Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Among New Firms Panel A: Y 2007 0.5 Co rp . SOE Pri v . SOE Pri v ate 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 10 1 10 2 Panel B: Y-L 2007 0.5 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 10 1 10 2 Panel C: Y-K 2007 0.5 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 10 1 10 2 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Summary Exit SOEs: low Y, Y-L and Y-K relative to incumbent SOEs Incumbent SOEs: 1998: low Y-L and Y-K relative to incumbent private …rms 2007: similar Y-L but low Y-K New SOEs: high Y, similar Y-L and low Y-K relative to new private …rms Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion The Model A standard model of monopolistic competition with heterogeneous …rms (e.g., Hsieh and Klenow, 2009) Firms are index by i in industry s, i 2 f1, 2, , Is g. Each …rm produces di¤erentiated goods by a Cobb-Douglas technology with constant returns to scale: Qsi = Asi Ksiαs L1si αs . Households maximize a CES aggregate of Qsi , Is Qs = ∑ i 1 η Qsi !11η , 1/η 0. (1) Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Equilibrium Conditions Denote Ysi implies Psi Qsi value-added. Firms’pro…t maximization MRPLsi = (1 MRPKsi = αs (1 αs ) (1 η) η) Ysi = 1 + τ Lsi ws , Lsi Ysi = 1 + τ Ksi (r + δs ) . Ksi Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion TFP We can back out TFP, Asi , by Asi = Ysi Ys η 1 η Ysi Ksi αs Ysi Lsi 1 αs (2) Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Parameterization Benchmark: 1 αs : using the average labor income share of private …rms in the corresponding two-digit industry adjusted by Qian and Zhu (2012). 1/η: 7 (corresponding to markups of 1.17). Introduction Facts The Model TFP and Distortions Our Story Counterfactuals TFP of Incumbent Firms Panel A: TFP 1998 0.5 Co rp . SOE Pri v . SOE Pri v a te 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 TFP 1 10 2 10 Panel B: TFP 2007 0.5 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 TFP 1 10 2 10 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Relative TFP by Initial Size Panel A: R elativ e TFP of Inc umbent C or p. SOE Panel B: R elativ e TFP of Inc umbent Priv . SOE 1 1 1998 2007 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0 20 40 60 80 100 perc entiles by 1998 v alue-added 0.2 0 Panel C : R elativ e TFP of C orp. SOEs in 2004 and 2007 1 20 40 60 80 100 perc entiles by 1998 v alue-added Panel D : R elativ e TFP of Pr iv . SOEs in 2004 and 2007 1 2004 2007 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0 20 40 60 80 100 perc entiles by 2004 v alue-added 0.2 0 20 40 60 80 100 perc entiles by 2004 v alue-added Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals TFP of Exit and New Firms Panel A: TFP of Firms in 1998 0.5 In c . Ex i t In c . Ex i t 0.4 SOE SOE Pri v a te Pri v a te 0.3 0.2 0.1 0 -2 10 -1 10 0 10 log R elativ e TFP 1 10 2 10 Panel B: TFP of N ew Firms in 2007 0.5 Ne w Co rp . SOE Ne w Pri v . SOE Ne w Pri v a te 0.4 0.3 0.2 0.1 0 -2 10 -1 10 0 10 log R elativ e TFP 1 10 2 10 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Distortions We can back out the relative τ Lsi and τ K si by 1 + τ Lsi ∝ Ysi , Lsi 1 + τK si ∝ Ysi . Ksi The average distortions in each industry: 1 + τ Ls (J ) ∝ Ys ( J ) , Ls (J ) 1 + τK s (J ) ∝ Ys ( J ) . Ks (J ) τ Ls = 0 for incumbent private …rms and τ K s = 0 for incumbent corporatized SOEs. Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Labor and Capital Distortions Panel A: Av erage τ L Panel B: Av erage τ 0 K 2 Co rp . SOEs Pri v . SOEs Pri v . Fi rm s Pri v . SOEs 1.8 -0.1 1.6 1.4 -0.2 1.2 1 -0.3 0.8 0.6 -0.4 0.4 0.2 -0.5 1998 2000 2002 y ear 2004 2006 0 1998 2000 2002 y ear 2004 2006 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Distortions for Exit and New SOEs Exit SOEs New Corp. SOEs 1998 τL τK -0.55 -0.06 2007 τL τK 0.34 0.10 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Key Findings on TFP and Distortions: A Summary TFP of SOEs grew at a faster rate than that of private …rms. Disparity across …rms. Labor distortions on SOEs have been disappearing. Capital distortions on private …rms remained stable from 1998 through 2007. Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Caveats Heterogeneous markups: No big e¤ect on TFP growth if markups are time-invariant Downward biased TFP growth of privatized SOEs if privatization reduces market power Restructuring of state assets: Downward biased TFP, labor and capital productivity growth of incumbent SOEs Arti…cially high-performing new SOEs Broadly de…ned “Grasp the Large” Introduction Facts The Model TFP and Distortions Our Story Counterfactuals China-Style Coporatization Improvement in corporate governance Fostering competition: State ownership 6= state monopoly Most industrial ministries were dismantled in the late 1990s. Entry of private …rms. Increasingly …erce competition among SOEs Active entry at the …rm level (2% entry rate for SOEs) Accountability: The number of centrally controlled conglomerates dropped from 189 in 2003 to 124 in 2010. Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Market Shares VA Share of SOEs Mining of Coal Extraction of Petroleum Processing of Petroleum Chemical Ferrous Metals Non-Ferrous Metals Transport Equipment Communication Equip. Electric and Heat Power 1998 81.6 99.9 87.2 48.6 78.5 53.6 61.3 37.0 72.2 2007 64.7 90.7 48.7 22.0 45.1 32.5 46.1 7.8 82.2 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals TFP Growth and Entry Panel A: TFP Grow th of C orp. SOEs Panel B: TFP Grow th of C orp. SOEs 0.2 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0.05 0.1 0.15 0.2 0 0 Panel C: TFP Grow th of Priv . SOEs 0.2 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0.05 0.1 0.15 0.2 0 0 Panel E: TFP Grow th of Priv ate Firms 0.2 0.2 0.15 0.1 0.1 0.05 0.05 0.1 0.15 av erage entry rate of priv ate firms 0.02 0.03 0.04 0.05 0.01 0.02 0.03 0.04 0.05 Panel F: TFP Grow th of Priv ate Firms 0.15 0 0.05 0.01 Panel D: TFP Grow th of Priv . SOEs 0.2 0 0 0.01 0.02 0.03 0.04 av erage entry rate of SOEs 0.05 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Labor Distortion: Overhead Labor Denote fsi the …xed overhead labor. Then, Qsi = Asi Ksiαs (Lsi fsi )1 αs Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Labor Distortion: Overhead Labor Denote fsi the …xed overhead labor. Then, fsi )1 Qsi = Asi Ksiαs (Lsi αs The FOC is MRPLsi (1 αs ) (1 η) Ysi Lsi fsi = 1 + τˆ Lsi ws , which gives (1 αs ) (1 η) Ysi = Lsi 1 fsi Lsi 1 + τˆ Lsi ws . Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Labor Income Share Rewrite the FOC as 1 + τ Lsi ws Lsi (1 = Ysi {z } | αs ) (1 1 fsi L si η) . Labor Income Share Change in fsi /Lsi would manifest itself in labor income share. Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Evidence: Labor Income Shares in the 1998-2007 Balanced Panel 0.5 C orp. SOEs Priv . SOEs Priv ate Firms 0.45 0.4 0.35 0.3 0.25 0.2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Assumptions Within industry resource reallocation No redundant workers and exogeneous interest rates Robustness checks Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Does TFP Growth of a Firm Reduce Aggregate Output? Exogenous interest rate: dYs /dAsi > 0 if and only if Ys /Ls 1 < Ysi /Lsi (1 αs (1 η ) . αs ) (1 η ) Endogenous interest rate: dYs /dAsi > 0 if and only if (1 αs ) (1 η) Ys /Ls + αs (1 Ysi /Lsi η) Ys /Ks < 1. Ysi /Ksi Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Experiments Benchmark: Set TFP and distortions of exit, incumbent and new SOEs to their initial values. Let Go of the Small: Exit SOEs + Incumbent privatized SOEs Grasp the Large: Incumbent corporatized SOEs Entry: New SOEs Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Results: Aggregate 8 Benc hmark Data 7 6 5 4 3 2 1 0 1998 1999 2000 2001 2002 2003 y ear 2004 2005 2006 2007 Conclusion Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Welfare Gains Let Go of the Small Grasp the Large Entry Overall Open Economy RW (0%) RW (20%) 1.8 12.6 (4.7 ) Closed Economy RW (0%) RW (20%) 0.1 6.0 7.7 10.2 -3.7 -2.4 5.8 5.4 0.8 0.7 13.4 27.9 -1.9 5.1 (19.9 ) (6.3 ) Introduction Facts The Model TFP and Distortions Our Story Counterfactuals Conclusion Conclusion The transformation of the state sector over 1998-2007 Reduces the gap of TFP and labor productivity between SOEs and private …rms. Welfare gains are sensitive to model speci…cations. Secret weapons: Fostering competition Tolerating unemployment About the objective function of China’s government