DP2781 A Multi-Task Theory of the State Enterprise Reform

Author(s): Chong-En Bai, David Daokui Li, Zhigang Tao, Yijiang Wang
Publication Date: May 2001
Keyword(s): Dual-Track Reform, Multi-Task, Social Stability, Unemployment
JEL(s): D21, J23, L20, P20, P23, P31
Programme Areas: Transition Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2781

During transition, maintaining employment and providing a social safety net for 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 multi-tasks 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.