Exterprise-level reform is one of the economic reforms implemented in Mainland China since 1978. This study presents the productivity effects of this reform, the concepts of property rights and the relevant factors of institutions.
The Chinese enterprise-level reform programs, under the same ownership structures, have three basic components: (i) the devolution of greater discretionary authority in managing enterprises; (ii) the use of material incentives (in the form of profit retention or bao gan schemes for enterprises and bonuses for individual workers); and (iii) the introduction of the market in guiding resource allocation. Since the collective enterprises owned by townships and villages (CEOTV) embody these three characteristics, we choose them to be the object of this study.
First, by using the stochastic frontier production function model, we conclude that the productive efficiency of the CEOTV increases year by year. Second, by employing the augmented production function model which involves the proxy variables of enterprise autonomy and other productive variables, we directly prove that the devolution of enterprise autonomy positively affects the productivity of an enterprise.
