Township-Village Enterprises (TVEs) emerged from commune-brigade enterprises in the 1950s and have developed more rapidly in recent years in mainland China. The development of TVEs is an institutional innovation in the process of economic reform. Their distribution has been unbalanced geographically, with the eastern region experiencing more rapid development than either the middle or western regions.
This paper empirically examines the influence of local characteristics on the development of TVEs in Jiangsu, Henan, Hunan, and Shaanxi provinces, considering such factors as agricultural surplus labor, community government expenditure, markets, and labor costs.
Using pooled cross-section and time-series data for the 1989-1992 period, empirical results show that agricultural surplus labor has had an adverse effect in Hunan and Shaanxi provinces. Community government expenditure has had a positive effect on TVEs in Jiangsu and Hunan provinces, and a negative effect in Shaanxi province. Markets also have had a positive effect in both Jiangsu and Hunan provinces. However, labor costs in Hunan and Shaanxi provinces have had a negative effect on TVEs.
