Leaders, managers, and the organization of township and village enterprises in China

The managerial contractual form in China's township and village enterprise (TVE) sector has evolved rapidly during the past 10 years. Our paper uses d escriptive data and a theoretical model to demonstrate that these changes m ay be occurring in response to the rapid development of markets in transiti onal rural China. We econometrically test the model's main hypotheses, show ing that the driving force behind the movement from a leader-run fixed-wage contract to a fixed-payment contract with better incentives for the manage r is the relative value of non-marketed inputs owned by local leaders and f irm managers. Firm technical structure and local market setting also plays a role in the determination of firm contractual form. (C) 1999 Elsevier Sci ence B.V. All rights reserved.