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July 2000CHINA’S EMERGING MARKET FOR PROPERTY RIGHTS: THEORETICAL AND EMPIRICAL PERSPECTIVES*

By H. Jefferson and Thomas G. RawskiGary H. Jefferson and Thomas G. Rawski

Abstract

This paper contrasts state-directed and market–mediated reform of enterprise ownership rights in transition economies, a distinction that corresponds to the alternative theoretical approaches of A.C. Pigou and of Ronald Coase to devising remedies for the externalities associated with commonly held resources. We evaluate China’s emerging market for enterprise ownership rights from the perspective of conditions underpinning the Coase Theorem: the assignment of property rights, the degree of competition, and the nature of transaction costs. China’s recent experience suggests that policies designed to expand the scope of decentralized exchange of ownership rights may succeed in raising productivity and efficiency even under conditions that deviate widely from the ideal assumptions underlying the Coase Theorem. China faces an important choice between restructuring ownership rights on the basis of market forces or administrative decisions. Key words: China, ownership, property rights, Coase Theorem, transition, merger, transaction costs *We acknowledge financial support from the Henry Luce Foundation and the Willia

Year: 2000
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