The size of the SOE sector and macroeconomic performance: an empirical study based on Chinese provincial data

Using a neoclassical growth model augmented with human capital, we investigate the impact of the presence of state owned enterprises (SOEs) on macroeconomic performance in China, using provincial data from 1990 to 2004. We estimate a macroeconomic model with panel methods to explain changes in labor productivity resulting from standard influences as well as presence of the SOE sector measured in five different ways. While controlling for growth in the labor force and physical capital, government size, exposure to trade and change in economic structure, we conclude that the relative share of the SOE sector has no significant influence on macroeconomic performance in China during our sample period.