E ects of Deregulation and Vertical Unbundling on the Performance of China's Electricity Generation SectorHang Gao University of Leuven Johannes Van Biesebroecky

Hang Gao
Johannes Van Biesebroeck

The 2002 restructuring of the Chinese electricity sector reshaped the market structure by vertically unbundling the dominant integrated rm and put forward a road map towards wholesale price liberalization. We estimate factor demands to study whether these reforms boosted productivity in the generation segment of the industry. Controlling explicitly for sources of price-heterogeneity across firms and the endogeneity of unobserved productivity effects, we find the reform to be associated with a reduction in labor input and material use of 6 and 4 percent, respectively. This eff ect only appears two years after the reforms and is robust to alternative ways of identifying restructured firms.

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