A Multitask Theory of State Enterprise Reform

Abstract

During transition, maintaining employment and providing a social safety net to the unemployed are important to social stability, which in turn is crucial for the productivity of the whole economy. Because independent institutions for social safety are lacking and firms with strong profit incentives have little incentive to promote social stability due to its public good nature, state-owned enterprises (SOEs) are needed to continue their role in providing social welfare. Charged with the multitasks of efficient production as well as social welfare provision, SOEs continue to be given low profit incentives, and consequently their financial performance continues to be poor.J. Comp. Econom., December 2000, 28(4), pp. 716-738. The University of Hong Kong, Hong Kong, and WDI; Hong Kong University of Science and Technology, Hong Kong, CEPR, and WDI; The University of Hong Kong, Hong Kong; University of Minnesota, Minneapolis, Minnesota 55455, CEPR, and WDI. © 2000 Academic Press.