Cheong, "China's economic reforms and establishment size, revealed comparative advantage, and policy effects: A new institutional economics approach," 1990

Young-rok Cheong, Ph.D.

Abstract (Summary)
This study applies the New Institutional Economics (NIE) framework of transaction costs and collective action to Chinese economic reforms. Two important economic reforms were allowing partial property rights and encouraging an opening up to western countries. These reforms brought new opportunities to many different economic agents. Specifically, the partial retention of foreign exchange, free markets for above-target production of certain consumer goods, and easier foundation of small private enterprises stimulated productive economic activity but in the process also created plenty of room for the practice of opportunistic behavior. In particular, we investigate to what extent and how economic reforms have modified an entrepreneur's choice of establishment size and China's revealed comparative advantage (RCA). While it is demonstrated that the reforms have generally had a very positive effect on growth, this doesn't necessarily imply that China will retain and extend the reforms in the future. The future direction of China's economic policy, which is of great importance to the world as a whole, is generally considered very uncertain and the subject of considerable controversy and guesswork. Since after ten years of economic reforms, various interest groups have been formed each of which may exert influence over present and future economic decisions, this study attempts to predict the future direction of economic policy in China on the basis of the theory of collective action as well as other more traditional reasoning. (Copies available exclusively from Micrographics Department, Doheny Library, USC, Los Angeles, CA 90089-0182.)

Advisor: Nugent, Jeffrey B.