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Abstract
We study empirically the relationship between ownership of firms and institutional environment in transition and developing economies by examining China's rural non-farm sector, which consists of both private enterprises and community government-run enterprises (known as township-village enterprises, or TVEs). We found that all the variables related to the legacy of planning favor TVE ownership, and all the variables related to market-oriented reforms and market development encourage private ownership. We also found that TVEs help increase the revenue shares of state and community governments, as well as rural non-farm employment and income. However, their effect on rural income is insignificant given the level of non-farm employment.