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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Incentive Complementarity in China’s Rural Enterprises

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Publisher
Springer US
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-008-9178-8
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Sep 2, 2008

References

  • Instrumental variables and the search for identification: From supply and demand to natural experiments
    Angrist, J.; Krueger, A.B.
  • Outside directors, ownership structure and firm profitability in Korea
    Cho, D.-S.; Jootae, K.
  • Labor flexibility, ownership and firm performance in China
    Lane, J.; Broadman, H.; Singh, I.

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