Sj. Yao, DOES PROFIT-SHARING WORK IN A CENTRALLY-PLANNED ECONOMY - EVIDENCE FROM THE CHINESE STATE INDUSTRIES, Applied economics letters, 2(4), 1995, pp. 126-129
Many studies indicate that profit-sharing is an effective incentive to
boost productivity of firms in the western economies such as USA, UK
and Germany. Whether a similar incentive scheme can work in a centrall
y-planned economy like China has not been well researched. China intro
duced a profit-sharing and bonus-payment scheme in the state-owned ent
erprises (SOEs) from 1979 in an attempt to reform the state industries
. Using a modified CES production function in a non-linear simultaneou
s system, this study aims to estimate the impact of such a scheme on e
nterprise performance. It reveals that both labour quality and bonus i
ncentive played an important role in raising SOEs' productivity.