Incentive Complementarity in China’s Rural Enterprises

Incentive Complementarity in China’s Rural Enterprises Complementarity between incentive instruments is a central theme of theoretical research in industrial organization. However, despite its importance, empirical evidence on the existence of complementarities is limited. We identify complementarities between incentive mechanisms using a dataset on rural firms in China. Using a panel regression framework, we confirm that significant complementarities exist in terms of the impact of incentive instruments on the performance of firms. In order to evaluate the robustness of our results we account for unobserved differences in firm quality using fixed effects and instrumental variables regressions. Support for the complementarity hypothesis is found after controlling for unobserved heterogeneity. Review of Industrial Organization Springer Journals

Incentive Complementarity in China’s Rural Enterprises

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Springer US
Copyright © 2008 by Springer Science+Business Media, LLC.
Economics; Industrial Organization; Microeconomics
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