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First price bidding with employment constraint in
the SOE auction in China |
| WANG Hai |
| wanghai_hust@126.com |
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Abstract ZHANG Weidong
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School of Economics, Huazhong University of Science and Technology, Wuhan 430074,
China
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Corresponding Author(s):
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.
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Issue Date: 05 March 2007
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