A Study Of Social Costs Of Soes Reform In Transitional Periods Of China

Since 1978,the SOEs reform in the Mid-late 1990 s is a momentous historic event to mark the second stage of the market transition process in China,which is so-called“reform with losers.” Specifically,the central and local government consecutively release two main policies,including “grasping the large and letting the small go” and“one-time massive layoffs.” There is no doubt that this reform pushes that market shift towards climax and reform shocks have plagued society,family and people.When researchers discuss the market transition process in China,they are unable to get through the SOE reform events.From now on,in perspective of the economic performance,productivity,revenue level of people,saving habits,and accumulation of human capital,a lot of literature already assess the effects of the SOE reform.However,to the best knowledge of this paper,a few pieces of empirical studies concentrated on the SOE reform's social cost during the transition era.On the one side,the issue of social crime.In the early 1990 s,urban crime levels rose to a comparatively elevated point,which is known as the “fifth peak crime era” in China.One of the primary factors behind this social phenomenon was the increase in actual unemployment rates as a consequence of the reform.Public trust in government,on the other side.The “low salary,full employment and high welfare” policy,as part of the planned economy system,was not only the political objectives but also implicit agreements signed by the state and urban residents.This SOEs reform led to the fall of the unit(Dan Wei)system,and the layoffs were the losers that could potentially decrease the degree of government confidence in the government.The reinforcement of reforms differs in particular in the prefectures.Regional variations also existed for the financial and social results.Based on institutional context,this article discusses the following four critical hypotheses from a social cost perspective.First,during the market transition age,what are the SOE reform features? Second,what is the causality of this reform's link to China's crime rate? Third,what is the causal relationship between this reform and central and local government public trust? Fourth,how can prefecture ownership structure mitigate the adverse effects of reforms on crime levels and public trust?The three primary baseline findings in this research are:(1)Characteristic Facts: During the market transition era,the SOE reform comprises of two associated policies,including “grasping the large and letting go of the small,” resulting in the economic and social cost aspects of the outcomes.(1)The average SOE restructuring rate is over 50 percent for the “grasping and letting the small go” policy,and regional varieties are present.In particular,the eastern coastal regions have a greater rate of corporate restructuring than the central western regions.In addition,there are also several cluster belts in the central-western regions that have a high rate of SOEs firms restructuring.(2)The northeastern provinces and other centralwest regions experienced greater unemployment attacks than the eastern coast regions in the case of the massive layoffs policies.In terms of layoffs,“direct layoffs” and“buyouts(Mai Duan)” are the primary methods and the process of “inner retreat” is restricted.However,we do not recognize a specific pattern between these three distinct layoffs,restricted by the size of the data sets.(3)This SOE reform decreases the share of the SOEs and increases the share of private companies among ownership structures considerably for the financial results.From the eastern to the central-western regions,the share of the SOEs rises gradually,whether the index is calculated by the amount of companies or the added value of industrial output.(4)For social costs,this reform is a typical institutional change consisting of contentious reconstruction and huge layoffs.The levels of urban crime are therefore increasing considerably,and large-scale unpredictable violence events and protests occurred in China during this era.(2)Causality Identification: The SOEs reform drives criminal rates up in the transition era and reduces the public confidence in the government on an ongoing basis.(1)With respect to criminal behaviour,on the theoretical basis of the crime economics and of the transitional economics,the hypothesis is constructed as follows:“layoffs(?)labor market conditions(?)crime rates.” Using the provincial and prefecture data sets,provincials and prefectures with greater exposure to layoffs during reforms tend to have greater crime rates in the subsequent period and this impact holds for at least 4–7 years.(2)In public trust in government,we placed the following hypothesis forward by means of consensus conclusions from the fields of crime economics,political psychology and cultural economics: “SOEs reform (?) public trust in government.” Based on the CGSS survey data and hand-picked petition instances this article analyzes the impact of this reform on the confidence of people in central and local government.By utilizing a province-wide variation in the amount of layoffs and cohort-specific variations due to an adverse employment shock,we discover that people with higher exposure to layoffs and working ages are less trustful in the central and local governments of provinces during the reform era.The findings of the DID model also support this baseline conclusion and are robust to various robustness checks by taking advantage of petition data.The empirical evidence suggests that China's SOE reform has reduced government confidence in political organizations over the transitional era.(3)Heterogeneous effects: The share of private companies and the “informal economy” can alleviate the social cost shocks induced by the SOE reform in the transition era.(1)The growing amount of private firms for industrial companies above the scale can substantially decrease the crime rates and alleviate the negative impacts on government confidence of a reform of the SOE.The logic of this is to decrease the unemployment rate and “search costs” on the labor market efficiently by generating jobs.As a consequence,improved labor market circumstances have a beneficial impact on the mitigation of SOE reform's social costs.(2)As a key element of urban economies,for tiny private enterprises and self-employed mercants,“informal economy” and the growing amount of tiny private enterprises and self-employed merchants efficiently decrease the adverse effect of the reform of this SOE on crime and public confidence in the state.Although tiny companies and self-employed businesses have restricted production,they are able to generate jobs.Taking into account China's booming urban economy in the transition era,the “informal economy” plays a key financial role in generating jobs and raising the amount of revenue among low-income urban communities.