PUBLIC VERSUS PRIVATE OWNERSHIP OF FIRMS - EVIDENCE FROM RURAL CHINA

Why are many of China's successful rural enterprises publically owned by local communities? Using a set of provincial data, we find that the share of community public firms (Township-Village Enterprises, or TVE s) relative to private enterprises is higher where the central governm ent's influence is greater, the community government's power is strong er, and the level of market development is lower. We also find that TV Es help achieve the community government's goals of increasing governm ent revenue, rural nonfarm employment, and rural income. However, TVEs do not increase rural income given the levels of nonfarm employment a nd local public goods provision, indicating possible inefficiency as c ompared with private enterprises.