Please wait a minute...

Frontiers of Economics in China

Front. Econ. China    2007, Vol. 2 Issue (1) : 63-66     https://doi.org/10.1007/s11459-008-0004-x
First price bidding with employment constraint in the SOE auction in China
WANG Hai  1, ZHANG Weidong 2
1. School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China ; 2.School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China;
Download: PDF(387 KB)  
Export: BibTeX | EndNote | Reference Manager | ProCite | RefWorks
Abstract The transfer of SOE’s property right involves benefits readjustment of its stakeholders; therefore the design of the trading mechanism is not only to sell the SOE with a high price but also to realize other non-price objectives such as rearrangement of original employees, further development of the enterprise etc. This paper constructs a bidding mechanism with the constraint of accommodating employees to analyze the tradeoff between maximizing SOE auction revenue and minimizing induced unemployment. By adding that the winner is required to settle down a certain quantity of former SOE employees in the new enterprise, this mechanism brings on the competition among prospective investors in both the price and the quantity of employment, which can help the government to balance the different objectives more efficiently. However, the constraint will only work under the condition that the government has stressed sufficiently on the employees’ rearrangement and set the best constraint threshold. Moreover, the government should set an explicit compensation standard for the induced lay-offs to eliminate the investors’ accommodating cost dispersion and introduce more strategic investors with considerable heterogeneity to participate in the bidding.
Issue Date: 05 March 2007
 Cite this article:   
WANG Hai,ZHANG Weidong. First price bidding with employment constraint in the SOE auction in China[J]. Front. Econ. China, 2007, 2(1): 63-66.
 URL:  
http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0004-x
http://journal.hep.com.cn/fec/EN/Y2007/V2/I1/63
Service
E-mail this article
E-mail Alert
RSS
Articles by authors
WANG Hai
ZHANG Weidong
Viewed
Full text


Abstract

Cited

  Shared   
  Discussed