| Abstract | “Feeling invisible stones across a river” is a good summary of China’s institutional change’s experience since the reform and opening up. From the establishment of nationalization and planned economic system in the early days of the founding of New China to the establishment of the contract system and market economy system in the initial stage of reform and opening up, China’s institutional changes have always been in a discontinuous state. From the perspective of institutional change theory, this discontinuous institutional change’s economic performance is more uncertain than that of gradual institutional change. Therefore, changes in the performance caused by sudden changes in the system are often unexpected, which seems to have become the successful experience of China's economy’s rapid growth in the past thirty years: China has gone an unusual way through feeling invisible stones. However, with the aging of the old system, the institutional system becomes more and more massive. The marginal revenue that each single unsystematic institutional change can bring is naturally getting smaller and smaller.
At the end of 2013, the central committee of the communist party of China issued the report “The decision on comprehensively deepening reform about some major issues”, attempting to make a fundamental change, i.e. designing a systematic new system for urban utilities: state-owned capital must keep holding in the industry of natural monopoly whose mixed ownership reform should be cautious and mixed ownership reform’s priority object is competitive segment without natural monopoly. Academic scholars have been in long-term focus on the discussion about whether it’s necessary to carry mixed ownership reform. But few studies can answer practical questions about how reform should proceed. So how should the natural monopoly industry proceed with the reform of mixed ownership, or which urban utilities should mixed ownership reform in priority be carried in?
To make it, based on cost function analysis founded by William Baumol, this paper firstly uses a panel data from 1998 to 2008 which includes national urban public enterprises above designated size to measure attributes of natural monopoly in industry level and total factor productivity in enterprise level, and then sort out a sample consisting of those firms that have experienced early property rights reform and become mixed ownership enterprises. Finally, this paper empirically tests the relationship among natural monopoly, mixed ownership reform, and the production efficiency of enterprises through triple difference method based on natural experiment.
The main conclusions of this paper are as follows: 1) in the natural monopoly link of urban utilities, the mixed ownership reform can’t significantly improve the production efficiency of enterprises; 2) the traditional DID model wouldn’t verify the remarkable achievements of the mixed ownership reform if natural monopoly and competitive link weren’t distinguished and the way of carrying mixed ownership reform without any distinguishing contains much policy uncertainty; 3) in the competitive link without natural monopoly, the mixed ownership reform has a significant positive effect on the productivity of municipal utilities. Compared with the natural monopoly, the production efficiency of the competitive link will be significantly improved after the reform of mixed ownership and the “policy dividend” of system reform will be greater. Therefore, the reform of mixed-ownership in urban utilities should be carried in the competition link without natural monopoly. The key in the reform of mixed ownership is to determine the natural monopoly property in specific city and specific public utilities. This work needs to be started with cost data, so the accuracy and openness of cost data is crucial. Therefore, this paper suggests that the cost data of city utilities must be made publicly available to government industry management departments, which can be promoted through combining the recent legislative work.
The marginal contribution of this paper lies in taking the mixed ownership reform into the framework of natural monopoly theory and specifically distinguishes its heterogeneity effect between monopolistic link and competitive link and furthermore gives some policy suggestions on how to carry mixed ownership reform. This paper’s studies may help provide inspiration and method reference in promoting natural monopoly theory’s application in state-owned enterprises’ reform. |