Privatization and firm performance: A comparison between rural and urban enterprises in China

Using panel data on 165 rural and urban firms from Nanjing municipality and its environs, we investigate the pattern and consequences of property rights reform and privatization in the late 1990s. We find that privatization policies appear to have targeted the weakest firms in the urban sector, whereas no correlation is found between performance and selection for privatization in the rural sector. For urban firms, the adoption of some degree of private ownership is associated with significant improvements in productivity and profitability; in contrast, the positive effects of privatization on rural firms are found only for some measures. Journal of Comparative Economics 34 (3) (2006) 608-633. University of Winnipeg, Winnipeg, MB, Canada R313 2E9; Brown University, Providence, RI 02912, USA; Louisiana State University, Baton Rouge, LA 70803, USA. (c) 2006 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.