Do Institutions Not Matter in China? Evidence from Manufacturing Enterprises

This study addresses the apparent puzzle that China achieved spectacular economic performance despite weak institutions. Using a World Bank survey of 1,566 manufacturing enterprises in 18 Chinese cities, we investigated whether property rights protection mattered for enterprise performance. We found that property rights protection had a positive and statistically significant impact on enterprise productivity. Two-step GMM estimation and the difference-in-differences estimation further established the causal impacts of property rights protection on enterprise productivity. These findings were robust to various controls, outliers, and alternative measures of productivity and property rights protection.