I put forward a new theoretical framework to analyze the relationship between soft budget constraint syndrome and the economic performances of firms. It differs from the existing theoretical framework, a la Dewatripont and Maskin (1995), in the soft budget constraint literature. In this paper,...

This paper presents a simple model of monopolistic competition that features a general class of additively separable preferences without any fixed costs. While trade always crowds out less productive firms as long as countries are symmetric, we show that the impact is independent of entry/exit a...

When countries are asymmetric, trade with heterogeneous firms can crowd in, rather than crowd out, less productive firms, and less productive firms almost always specialize in export. Whether and how these phenomena will arise depends on a country’s standing in the world. Our study helps...

We study China's township-village enterprises (TVEs) from an organizational perspective with a focus on governance. Unlike most previous studies, we interpret the firm boundaries of TVEs at the community level rather than the enterprise level. From this perspective, we analyze the central role...

China's remarkable economic growth occurred despite (1) the lack of secure property rights; and (2) government ownership of most non-state firms such as township-village enterprises. We unravel these two puzzles with a theory of ownership of firms facing state predation. We distinguish and...

Dual track liberalization, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful mechanism in economic reform. If not anticipated, the reform implements an outcome that is both Pareto improving and efficiency...

Government ownership may dominate private ownership under government failure. Such dominance disappears as product markets grow mature, giving rise to the need for privatization. Buyers' limited wealth imposes a constraint on how and when privatization takes place. In particular, firms may be...

This paper models a multilateral agreement on investment (MAI) as a coordination device. Multinational enterprises can invest in any number of countries. Without a multilateral investment agreement, expropriation triggers an investment stop by the single MNE. Under a multilateral agreement,...

Journal of Law, Economics, and Organization, April 1998. <p> We study China's township-village enterprises (TVEs) from an organizational perspective with a focus on governance. Unlike most previous studies, we interpret the firm boundaries of TVEs at the community level rather than the enterprise...</p>

This paper models a multilateral agreement on investment (MAI) as a coordination device. Multinational enterprises can invest in any number of countries. Without a multilateral investment agreement, expropriation triggers an investment stop by the single MNE. Under a multilateral agreement,...