David D. Li

A Multi-Task Theory of the State Enterprise Reform

During transition, maintaining employment and providing a social safety net to the unemployed are important to social stability, which in turn is crucial for the productivity of the whole economy. Because independent institutions for social safety are lacking and firms with strong profit incentives have little incentives to promote social stability due to its public good nature, state-owned enterprises (SOEs) are needed to continue their role in providing social welfare. Charged with the multi-tasks of efficient production as well as social welfare provision, SOEs continue to be given low profit incentives and consequently, their financial performance continues to be poor.

The effects of wage distortions on the transition:: Theory and evidence from China

Before the reforms, the Chinese government had strong distributional objectives, which it pursued mainly by direct controls over state enterprise wage rates and hiring decisions. During the reform period, similar controls over state enterprises continued, but use of them had to re ect competition with the new nonstate sector that was mostly free from these controls. Based on these distributional considerations alone, we can explain: 1) a decline in the skills of workers in the state sector as the most able workers leave, 2) higher productivity in the nonstate sector, which consists of the most able workers, 3) accounting losses in the state sector, re ecting the transfer of tax revenue to nance higher wage payments to the unskilled, and 4) restructuring within the state sector, to reduce the distortions to relative wage rates. Many of these attributes are shared with other types of transition process.

A Student Team in a University of Michigan Biomedical Engineering Design Course Constructs a Microfluidic Bioreactor for Studies of Zebrafish Development

The zebrafish is a valuable model for teaching developmental, molecular, and cell biology; aquatic sciences; comparative anatomy; physiology; and genetics. Here we demonstrate that zebrafish provide an excellent model system to teach engineering principles. A seven-member undergraduate team in a biomedical engineering class designed, built, and tested a zebrafish microfluidic bioreactor applying microfluidics, an emerging engineering technology, to study zebrafish development. During the semester, students learned engineering and biology experimental design, chip microfabrication, mathematical modeling, zebrafish husbandry, principles of developmental biology, fluid dynamics, microscopy, and basic molecular biology theory and techniques. The team worked to maximize each persons contribution and presented weekly written and oral reports. Two postdoctoral fellows, a graduate student, and three faculty instructors coordinated and directed the team in an optimal blending of engineering, molecular, and developmental biology skill sets. The students presented two posters, including one at the Zebrafish meetings in Madison, Wisconsin (June 2008).

Efficiency Losses from Tax Distortions vs. Government Control

Why has the rapid privatization of firms in Eastern Europe and the former Soviet Union not brought dramatically higher performance as expected? If private ownership were so clearly dominant, why has state control of enterprises been such a common phenomenon historically, even in many Western countries? In this paper, we argue that with private ownership, any price distortions (whether from high tax rates or explicit price controls) generate efficiency losses roughly proportional to the square of the implicit tax rate. In contrast, the efficiency loss under state ownership should be largely independent of these implicit tax rates. Therefore, the efficiency loss from state ownership can be less than that from private ownership when price distortions become large enough. Historically, there does seem to have been a close association between state ownership and high tax rates. For good reasons, privatization is normally associated with sharp drops in tax and nontax distortions. When privatization occurs without a substantial reduction in tax rates, as in Russia, efficiency costs from the high tax rates have been obvious, raising questions about the internal consistency of this set of policies.

FINANCIAL REPRESSION AND OPTIMAL TAXATION

Financial repression entails an implicit taxation on savings. When effective income-tax rates are very uneven, as common in developing countries, raising some government revenue through mild financial repression can be more efficient than collecting income tax only.

Experimental evaluation and computational modeling of tissue damage from low-flow push–pull perfusion sampling in vivo

BACKGROUND Neurochemical monitoring via sampling probes is valuable for deciphering neurotransmission in vivo. Microdialysis is commonly used; however, the spatial resolution is poor. NEW METHOD Recently push-pull perfusion at low flow rates (50nL/min) has been proposed as a method for in vivo sampling from the central nervous system. Tissue damage from such probes has not been investigated in detail. In this work, we evaluated acute tissue response to low-flow push-pull perfusion by infusing the nuclear stains Sytox Orange and Hoechst 33342 through probes implanted in the striatum for 200min, to label damaged and total cells, respectively, in situ. RESULTS Using the damaged/total labeled cell ratio as a measure of tissue damage, we found that 33±8% were damaged within the dye region around a microdialysis probe. We found that low-flow push-pull perfusion probes damaged 24±4% of cells in the sampling area. Flow had no effect on the number of damaged cells for low-flow push-pull perfusion. Modeling revealed that shear stress and pressure gradients generated by the flow were lower than thresholds expected to cause damage. Comparison with existing methods.Push-pull perfusion caused less tissue damage but yielded 1500-fold better spatial resolution. CONCLUSIONS Push-pull perfusion at low flow rates is a viable method for sampling from the brain with potential for high temporal and spatial resolution. Tissue damage is mostly caused by probe insertion. Smaller probes may yield even lower damage.

Ex Ante Effects of Ex Post Managerial Ownership

This paper highlights the trade-off between the need to restructure a company and the need to provide managers with appropriate incentives to run it after the restructuring. In order to provide incentives, it is optimal to let managers acquire equity in the firm. However, the expectations to be able to buy shares in the future may create ex-ante incentives to delay restructuring. This effect is particularly important for events where managers can acquire a substantial number of shares, such as privatizations or MBOs. In equilibrium, the shares are not underpriced, but the delay in restructuring which took place in the period before reduces the value of the company. We report empirical evidence on MBOs and privatizations consistent with the model in this paper.

Reforming State-Owned Enterprises: Diversifying Ownership Versus Improving Management

One line of thought on reforming state-owned enterprises (SOEs), the ownership school, stresses diversifying ownership to eliminate government control. A second line of thought, the management school, emphasizes the need to improve government’s management of SOEs by, for example, granting SOE employees the autonomy and profit incentives. Utilizing data on 680 SOEs in China, over 1980-94, we tested the relative effectiveness of two kinds of reform measures. Our results yield strong support for the ownership school and very mixed evidence for the management school. Moreover, we found that the impact of ownership diversification on SOEs’ economic performance was as strong as that of enhancing product-market competition.