Agency theory and the Chinese enterprise under reform

doi:10.1016/1043-951X(92)90014-D

China Economic Review

Volume 3, Issue 1, Spring 1992, Pages 39-56

https://doi.org/10.1016/1043-951X(92)90014-D Get rights and content

Abstract

This paper investigates structural wage reform pertaining to medium and large state-owned enterprises, within the context of the 1988 Enterprise Law. Evidence exists that this reform package failed to achieve its full potential. A primary purpose of the paper is to analyze this failure with the aid of principal-agent analysis, in which the manager is the principal and the workers are the agents. The analysis suggests that the reforms performed poorly since the workers' incentive problem was not adequately addressed. Much of the bonuses became fixed wage supplements, not tied to the output or to the profit of the enterprise. Moreover, free-riding incentives among workers were not adequately addressed. Multilevel concerns and the formation of coalitions among workers and supervisors are also analyzed. Means for making the reforms more effective are suggested. For example, rule governance can dilute collusion.

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Agency theory and the Chinese enterprise under reform

Abstract

European Economic Review

Journal of Comparative Economics

China's Nomenklatura System

Problems in Communism

Plan and Market in the Chinese Economy: A Simple General Equilibrium Model

Journal of Comparative Economics

Factor Allocation and Enterprise Incentives

The Chinese Economy

Economics and Consumer Behavior

Increasing the Vitality of Enterprises

A Tentative Plan for the Rational Sequencing of Overall Reform in China's Economic System

Journal of Comparative Economics

Information Systems for Principal-Agent Problems

The Development of Work Incentives in Chinese Industrial Enterprises-Material Versus Non-Material Incentives

Moral Hazard in Teams

Bell Journal of Economics

Efficiency Wages and Enterprise Behavior in China

The Journal of Communist Studies

Microeconomic Theory

Socialist Egalitarianism and the Agency Problem

Seoul Journal of Economics

Chinese Plant Bears Burden of Socialism

The Asian Wall Street Journal

China: Finance and Investment