Steve Cheung has been a pioneer in the research of marriage using economic approach. In this pape... more Steve Cheung has been a pioneer in the research of marriage using economic approach. In this paper, I shall describe his influence on marriage research in general and on my career in particular. Since Gary Becker had exerted a parallel influence, I will also discuss his impact as well.
We develop a theoretical model of how factional affiliation and local accountability can shape th... more We develop a theoretical model of how factional affiliation and local accountability can shape the policy choices of local officials who are concerned about political survivals, and subsequently affect the long-term local development. We provide empirical evidence in support of the theoretical predictions using county-level variations in development performance in Fujian Province in China. When the Communist armies took over Fujian Province from the Nationalist control circa 1949, communist cadres from two different army factions were assigned as county leaders. For decades the Fujian Provincial Standing Committee of the Communist Party was dominated by members from one particular faction, which we refer to as the strong faction. Counties also differed in terms of whether a local guerrilla presence had existed prior to the Communist takeover. We argue that county leaders from the strong faction were less likely to pursue policies friendly to local development because their political survival more heavily relied on their loyalty to the provincial leader than on the grassroots support from local residents. By contrast, the political survival of county leaders from the weak faction largely depended on local grassroots support, which they could best secure if they focused on local development. In addition, a guerrilla presence in a county further improved development performance either by intensifying the local accountability of the county leader, or by better facilitating the provision of local public goods beneficial to development. We find consistent and robust evidence supporting these assumptions. Being affiliated with weak factions and having local accountability are both associated with sizable long-term benefits that are evident in terms of a county's growth and level of private-sector development, its citizens' education levels, and their survival rates during the Great Chinese Famine. We also find that being affiliated with the strong faction and adopting pro-local policies are associated with higher likelihood of a local leader's political survival.
I evaluate the role of China's privatization of the economy in weakening the effects of the birth... more I evaluate the role of China's privatization of the economy in weakening the effects of the birth control policy, known as the one-child policy in the West, during the last three decades. State-owned enterprises or other state-owned organizations (SOEs) imposes more control over individual choices and hence represents increased state capacity (Acemoglu et al., 2015). The baseline OLS regressions show that compared to those not working in a SOE, the number of children for individuals working in a SOE is 0.1 lower on average. In other words, if the individuals not working in SOEs came to SOEs, we would probably lose 10 children for each one hundred of them. To deal with the selection issue, I use father's SOE status as an instrumental variable. The 2SLS results show a much larger difference in the number of children: 0.4. The existence of positive selection and the reduction in bias from job type switches probably rationalize the larger 2SLS results. Furthermore, Probit regressions give a strong negative impact of working in SOEs on the probability to have more than one child. These results imply that the birth control policy might already lead to an even lower fertility rate in China without privatization. * I am indebted to Daniel S. Hamermesh, Kishore Gawande and Michael Geruso for their guidance and support. I am also grateful to
Public listing is a key and unique reform measure for large state-owned enterprises (SOEs) in Chi... more Public listing is a key and unique reform measure for large state-owned enterprises (SOEs) in China. Using a panel data set that contains both pre-and postlisting financial and ownership information on publicly listed firms in Shanghai and Shenzhen Stock Exchanges, we explore the effects of public listing in China. We find that using public listings as a means to reform SOEs has not worked wonders: company performance in the post-listing years are sharply lower than their levels in both the prelisting years and the initial public offering years. Moreover, the effects of public listing on performance are not significantly affected by the percentage of state shares or of the total shares held by top shareholders, but are positively correlated with a more balanced ownership structure among these shareholders.
ABSTRACT Rigorous data-collection is important for accurate policy analysis. The paucity of data ... more ABSTRACT Rigorous data-collection is important for accurate policy analysis. The paucity of data in developing and transition economies makes policy analysis in such countries difficult. The World Bank has attempted to remedy this problem by conducting numerous surveys. This paper explores the rich experiences of the Bank in designing and implementing firm-level surveys. Our exploration leads to a series of lessons and tools that we hope policy makers and researchers can use for creating more effective surveys in the future.
... Similarly, Adhvaryu, Chari, and Sharma (2010) use comprehensive firm-level data (aggregated t... more ... Similarly, Adhvaryu, Chari, and Sharma (2010) use comprehensive firm-level data (aggregated to the level of district) in India to study how rainfall shocks affect labor adjustments differently in Indian states with various degree of labor regulations—again using the Besley ...
The Policy Research Working Paper Series disseminates the findings of work in progress to encoura... more The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
This article examines the extent to which agency theory may explain chief executive officer (CEO)... more This article examines the extent to which agency theory may explain chief executive officer (CEO) compensation in Chinese state-owned enterprises during the 1980s. We find support for the agency theory: CEO pay sensitivity decreases with the variance of performance. Moreover, the performance sensitivity of CEO pay increases with the marginal return to executive action. While the elasticity of pay to
... Chong-En Bai. University of Michigan - William Davidson Institute; University of Hong Kong - ... more ... Chong-En Bai. University of Michigan - William Davidson Institute; University of Hong Kong - School of Economics and Finance Lixin Colin Xu. World Bank - Development Research Group (DECRG) December 2000. Abstract: The multitask principal-agent theory argues that ...
ABSTRACT Using a sample of Chinese state-owned enterprises spanning 1980 to 1994, we investigate ... more ABSTRACT Using a sample of Chinese state-owned enterprises spanning 1980 to 1994, we investigate the factors that determine the sources of finance for firm-level fixed investment, including retained earnings, bank finance, and government transfers. Direct government transfers were not significantly associated with profitability throughout the period. In contrast, bank finance was positively linked to both profitability and some types of reform. Reforms that enabled managers to self-select, and thus expose themselves (and their employees) to greater risk, were positively associated with acquiring bank finance. The association between bank finance and profitability weakened in the 1990s as banks increasingly assumed bailout responsibility.
ABSTRACT This paper extends the methodology proposed first by Chames and Cooper [5 ] and further ... more ABSTRACT This paper extends the methodology proposed first by Chames and Cooper [5 ] and further specified by Kossov [12], to implement the Hatanaka condition [11] for zero aggregation bias in input-output systems. The notion of technological similarity across industries is ...
Using data from a recent national survey of the ownership restructuring of stateowned industrial ... more Using data from a recent national survey of the ownership restructuring of stateowned industrial enterprises in China, we find evidence that the performance outcome of the restructuring hinges greatly on the lessening of politician control and agency problems through increasing business autonomy, reducing the state's ownership stakes and introducing more effective corporate governance mechanisms. Specifically, we find that post-restructuring operating performance and managerial perception of the restructuring's success increase with the degree of decision-making autonomy (especially in labor policies) and proper representation of shareholder interest (as indicated by the use of the one-share-one-vote principle and shareholding-based composition of board structure); yet they decrease with the extent of ownership and management appointment by the government.
Since most of the dramatic changes in telecommunications policies occurred in the past two decade... more Since most of the dramatic changes in telecommunications policies occurred in the past two decades, sufficient data to evaluate the many differences in details across countries are only now emerging. Using a new data set on privatization, competition, regulation, and tariff policies of the telecommunications sector, this paper investigates the political economy of Telecommunications reforms. In particular, we empirically analyze the explanatory power of various factors-including sectoral performances, constituents characteristics, political structure, as well as macroeconomic variables-in shaping countries' decision of reforms. In so doing we are able to test some influential (but not mutually exclusive) hypotheses in the literature of policy reforms such as the crisis hypothesis, the constituents demand hypothesis, the private-interest hypothesis, the ideology hypothesis, and some hypotheses emerging from the new institutional economics.
In moving toward a more market-oriented system, how and State Enterprises did China's government ... more In moving toward a more market-oriented system, how and State Enterprises did China's government and Partitioned Property state enterprises partition control rights, incentives, and and Control Rights financial arrangements?
and the World Bank. The data set was kindly provided by Dr. Du Hai Yan. Financial support from th... more and the World Bank. The data set was kindly provided by Dr. Du Hai Yan. Financial support from the Prince Foundation, Asian Dissertation Writing Fellowship, and the University of Chicago are gratefully acknowledged. This paper, distributed by the Research Advisory Staff, carry the name of the author, reflects only my views, and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' own. They should not be attributed to the World Bank, its Board of Directors, its management, or any of its member countries. The remaining errors, of course, are my own. I.
ABSTRACT Many recent studies have looked at the macroeconomic, cultural and institutional determi... more ABSTRACT Many recent studies have looked at the macroeconomic, cultural and institutional determinants of corruption at the cross-national level. Using enterprise-level data on bribes paid to utilities in 21 transition economies in Eastern Europe and Central Asia, we examine how characteristics of the utilities taking bribes and the firms paying bribes affect the equilibrium level of corruption in the sector. Bribe takers (utility employees) are more likely to take bribes in countries with greater constraints on utility capacity, lower levels of competition in the utility sector, and where utilities are state-owned. Bribe payers (enterprises) are more likely to pay bribes when they are more profitable, have greater overdue payment to utilities, and are de novo private firms. Our study has several advantages over most existing studies. First, it uses an objective measure of corruption, rather than a subjective measure. Second, the large firm-level sample, which includes firms from multiple countries, allows us to examine both firm-level and national factors that might affect corruption. Finally, we are able to examine the behavior of both bribe takers and bribe payers.
Steve Cheung has been a pioneer in the research of marriage using economic approach. In this pape... more Steve Cheung has been a pioneer in the research of marriage using economic approach. In this paper, I shall describe his influence on marriage research in general and on my career in particular. Since Gary Becker had exerted a parallel influence, I will also discuss his impact as well.
We develop a theoretical model of how factional affiliation and local accountability can shape th... more We develop a theoretical model of how factional affiliation and local accountability can shape the policy choices of local officials who are concerned about political survivals, and subsequently affect the long-term local development. We provide empirical evidence in support of the theoretical predictions using county-level variations in development performance in Fujian Province in China. When the Communist armies took over Fujian Province from the Nationalist control circa 1949, communist cadres from two different army factions were assigned as county leaders. For decades the Fujian Provincial Standing Committee of the Communist Party was dominated by members from one particular faction, which we refer to as the strong faction. Counties also differed in terms of whether a local guerrilla presence had existed prior to the Communist takeover. We argue that county leaders from the strong faction were less likely to pursue policies friendly to local development because their political survival more heavily relied on their loyalty to the provincial leader than on the grassroots support from local residents. By contrast, the political survival of county leaders from the weak faction largely depended on local grassroots support, which they could best secure if they focused on local development. In addition, a guerrilla presence in a county further improved development performance either by intensifying the local accountability of the county leader, or by better facilitating the provision of local public goods beneficial to development. We find consistent and robust evidence supporting these assumptions. Being affiliated with weak factions and having local accountability are both associated with sizable long-term benefits that are evident in terms of a county's growth and level of private-sector development, its citizens' education levels, and their survival rates during the Great Chinese Famine. We also find that being affiliated with the strong faction and adopting pro-local policies are associated with higher likelihood of a local leader's political survival.
I evaluate the role of China's privatization of the economy in weakening the effects of the birth... more I evaluate the role of China's privatization of the economy in weakening the effects of the birth control policy, known as the one-child policy in the West, during the last three decades. State-owned enterprises or other state-owned organizations (SOEs) imposes more control over individual choices and hence represents increased state capacity (Acemoglu et al., 2015). The baseline OLS regressions show that compared to those not working in a SOE, the number of children for individuals working in a SOE is 0.1 lower on average. In other words, if the individuals not working in SOEs came to SOEs, we would probably lose 10 children for each one hundred of them. To deal with the selection issue, I use father's SOE status as an instrumental variable. The 2SLS results show a much larger difference in the number of children: 0.4. The existence of positive selection and the reduction in bias from job type switches probably rationalize the larger 2SLS results. Furthermore, Probit regressions give a strong negative impact of working in SOEs on the probability to have more than one child. These results imply that the birth control policy might already lead to an even lower fertility rate in China without privatization. * I am indebted to Daniel S. Hamermesh, Kishore Gawande and Michael Geruso for their guidance and support. I am also grateful to
Public listing is a key and unique reform measure for large state-owned enterprises (SOEs) in Chi... more Public listing is a key and unique reform measure for large state-owned enterprises (SOEs) in China. Using a panel data set that contains both pre-and postlisting financial and ownership information on publicly listed firms in Shanghai and Shenzhen Stock Exchanges, we explore the effects of public listing in China. We find that using public listings as a means to reform SOEs has not worked wonders: company performance in the post-listing years are sharply lower than their levels in both the prelisting years and the initial public offering years. Moreover, the effects of public listing on performance are not significantly affected by the percentage of state shares or of the total shares held by top shareholders, but are positively correlated with a more balanced ownership structure among these shareholders.
ABSTRACT Rigorous data-collection is important for accurate policy analysis. The paucity of data ... more ABSTRACT Rigorous data-collection is important for accurate policy analysis. The paucity of data in developing and transition economies makes policy analysis in such countries difficult. The World Bank has attempted to remedy this problem by conducting numerous surveys. This paper explores the rich experiences of the Bank in designing and implementing firm-level surveys. Our exploration leads to a series of lessons and tools that we hope policy makers and researchers can use for creating more effective surveys in the future.
... Similarly, Adhvaryu, Chari, and Sharma (2010) use comprehensive firm-level data (aggregated t... more ... Similarly, Adhvaryu, Chari, and Sharma (2010) use comprehensive firm-level data (aggregated to the level of district) in India to study how rainfall shocks affect labor adjustments differently in Indian states with various degree of labor regulations—again using the Besley ...
The Policy Research Working Paper Series disseminates the findings of work in progress to encoura... more The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
This article examines the extent to which agency theory may explain chief executive officer (CEO)... more This article examines the extent to which agency theory may explain chief executive officer (CEO) compensation in Chinese state-owned enterprises during the 1980s. We find support for the agency theory: CEO pay sensitivity decreases with the variance of performance. Moreover, the performance sensitivity of CEO pay increases with the marginal return to executive action. While the elasticity of pay to
... Chong-En Bai. University of Michigan - William Davidson Institute; University of Hong Kong - ... more ... Chong-En Bai. University of Michigan - William Davidson Institute; University of Hong Kong - School of Economics and Finance Lixin Colin Xu. World Bank - Development Research Group (DECRG) December 2000. Abstract: The multitask principal-agent theory argues that ...
ABSTRACT Using a sample of Chinese state-owned enterprises spanning 1980 to 1994, we investigate ... more ABSTRACT Using a sample of Chinese state-owned enterprises spanning 1980 to 1994, we investigate the factors that determine the sources of finance for firm-level fixed investment, including retained earnings, bank finance, and government transfers. Direct government transfers were not significantly associated with profitability throughout the period. In contrast, bank finance was positively linked to both profitability and some types of reform. Reforms that enabled managers to self-select, and thus expose themselves (and their employees) to greater risk, were positively associated with acquiring bank finance. The association between bank finance and profitability weakened in the 1990s as banks increasingly assumed bailout responsibility.
ABSTRACT This paper extends the methodology proposed first by Chames and Cooper [5 ] and further ... more ABSTRACT This paper extends the methodology proposed first by Chames and Cooper [5 ] and further specified by Kossov [12], to implement the Hatanaka condition [11] for zero aggregation bias in input-output systems. The notion of technological similarity across industries is ...
Using data from a recent national survey of the ownership restructuring of stateowned industrial ... more Using data from a recent national survey of the ownership restructuring of stateowned industrial enterprises in China, we find evidence that the performance outcome of the restructuring hinges greatly on the lessening of politician control and agency problems through increasing business autonomy, reducing the state's ownership stakes and introducing more effective corporate governance mechanisms. Specifically, we find that post-restructuring operating performance and managerial perception of the restructuring's success increase with the degree of decision-making autonomy (especially in labor policies) and proper representation of shareholder interest (as indicated by the use of the one-share-one-vote principle and shareholding-based composition of board structure); yet they decrease with the extent of ownership and management appointment by the government.
Since most of the dramatic changes in telecommunications policies occurred in the past two decade... more Since most of the dramatic changes in telecommunications policies occurred in the past two decades, sufficient data to evaluate the many differences in details across countries are only now emerging. Using a new data set on privatization, competition, regulation, and tariff policies of the telecommunications sector, this paper investigates the political economy of Telecommunications reforms. In particular, we empirically analyze the explanatory power of various factors-including sectoral performances, constituents characteristics, political structure, as well as macroeconomic variables-in shaping countries' decision of reforms. In so doing we are able to test some influential (but not mutually exclusive) hypotheses in the literature of policy reforms such as the crisis hypothesis, the constituents demand hypothesis, the private-interest hypothesis, the ideology hypothesis, and some hypotheses emerging from the new institutional economics.
In moving toward a more market-oriented system, how and State Enterprises did China's government ... more In moving toward a more market-oriented system, how and State Enterprises did China's government and Partitioned Property state enterprises partition control rights, incentives, and and Control Rights financial arrangements?
and the World Bank. The data set was kindly provided by Dr. Du Hai Yan. Financial support from th... more and the World Bank. The data set was kindly provided by Dr. Du Hai Yan. Financial support from the Prince Foundation, Asian Dissertation Writing Fellowship, and the University of Chicago are gratefully acknowledged. This paper, distributed by the Research Advisory Staff, carry the name of the author, reflects only my views, and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' own. They should not be attributed to the World Bank, its Board of Directors, its management, or any of its member countries. The remaining errors, of course, are my own. I.
ABSTRACT Many recent studies have looked at the macroeconomic, cultural and institutional determi... more ABSTRACT Many recent studies have looked at the macroeconomic, cultural and institutional determinants of corruption at the cross-national level. Using enterprise-level data on bribes paid to utilities in 21 transition economies in Eastern Europe and Central Asia, we examine how characteristics of the utilities taking bribes and the firms paying bribes affect the equilibrium level of corruption in the sector. Bribe takers (utility employees) are more likely to take bribes in countries with greater constraints on utility capacity, lower levels of competition in the utility sector, and where utilities are state-owned. Bribe payers (enterprises) are more likely to pay bribes when they are more profitable, have greater overdue payment to utilities, and are de novo private firms. Our study has several advantages over most existing studies. First, it uses an objective measure of corruption, rather than a subjective measure. Second, the large firm-level sample, which includes firms from multiple countries, allows us to examine both firm-level and national factors that might affect corruption. Finally, we are able to examine the behavior of both bribe takers and bribe payers.
Uploads
Papers by Lixin colin Xu