Property Rights and Stratification in Socialist Redistributive Economies
Author(s): Andrew G. Walder
Reviewed work(s):
Source: American Sociological Review, Vol. 57, No. 4 (Aug., 1992), pp. 524-539
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PROPERTY RIGHTS AND STRATIFICATION
IN SOCIALIST REDISTRIBUTIVE ECONOMIES*
ANDREWG. WALDER
HarvardUniversity
In socialist economies, work organizations differ widely in the compensation they provide
employees, despite the absence of key product and labor marketprocesses thought to explain such inequalities in market economies. Existing theories of stratification in socialist
economiesfocus on the power and privilege of elites, but inequalities among organizations
are not created bypolitical particularism or elite power. In this paper I sketch elements of an
institutionaltheory of stratificationanchored in a conception of property rights- the right
to derive incomefrom productive assets. Two aspects of property rights guide the analysis.
(1) the dispersion of property rights across a hierarchy of governmentjurisdictions,and (2)
the exercise of these rights by governmentjurisdictions as they extract revenues, primarily
throughtaxation.Extractionof revenuesfrom a work organization varies with the budgetary
resources of a governmentjurisdiction and the dependence of thatjurisdiction on the outputs of the organization. Variationin revenue extraction,in turn, creates inequalities among
work organizations in their abilities to provide benefits to employees. An analysis of survey
data on the provision of housing and benefits by work organizations in the large industrial
city of Tianjin, China provides provisional supportfor these ideas.
S
distribution,initiallydesignedto ensurethe minimum satisfactionof needs, endows a class of
withthe powerto allocatewealth,
administrators
deciand Szelenyi showed that "redistributive"
sions in Hungary exacerbated inequalities in
moneyincome(Szelenyi 1983,pp.9-11, 43-84).
Recent studieshave examinedthe effect of the
spreadof marketmechanismsin socialisteconomies on the powerandprivilegeof officials (Nee
1989, 1991; Szelenyi and Manchin1987;Ronatas 1990; Rona-tasand Kolosi 1992). In these
studies,poweris seen as a class phenomenonas redistributive
decisionsaremade,officialsdis*
Direct all correspondenceto AndrewG. Walder,
criminatein favor of themselves,theirfamilies,
Departmentof Sociology, William James Hall 480,
HarvardUniversity,Cambridge,MA 02138. This pa- and like individuals.'
Althoughelite theoryis foundedon the charper was writtenwhile I was a fellow at the Centerfor
AdvancedStudy in the BehavioralSciences in 1990 acterizationof socialisteconomiesas redistribuand 1991,whereI receivedstipendsupportunderNSF tive, the economicinstitutionsthroughwhichreGrantBNS-8700864. Researchon industrialplanning distributiontakes place have been neglected.A
and finance in Chinese cities was fundedby a 1985 focus on resourcetransfersand the behaviorof
grantfromthe Committeeon ScholarlyCommunica- organizations,ratherthan on the occupational
tudentsof communiststateshave had little
reasonto disputeLenski's(1966) claimthat
"thedistributionof rewardsin a societyis a function of the distributionof power"(p. 63). As exemplifiedin Szelenyi's weddingof elite theory
to institutionaleconomics,this ideahas been developedprimarilyin termsof the powerof classes or occupationalgroups. Szelenyi (1978) began withthe observationthatplannedeconomies
ratherthan
operateaccordingto "redistributive"
"market"principles.However,the processof re-
tion with the People's Republic of China, National
Academyof Sciences. The Tianjinhouseholdsurvey
was supportedby NSF GrantINT-8615759 and was
conductedin collaborationwith colleagues at the Instituteof Sociology, TianjinAcademy of Social Sciences. I thank Zhou Lu, who led the survey in the
field, JamesBaron,JohnCampbell,MichaelHandel,
ArneKalleberg,PeterMarsden,VictorNee, andAage
S0rensenfor valuablecritiquesof my earlierefforts,
and Steven Andrewsfor researchassistance.
524
IInitially,Szelenyi(1982) differedfromearlier"ruling class"theoristswho emphasizedthe privilegesof
the partyapparatus(eg. Trotsky[1937] 1972, Djilas
1957) by contendingthat this group was gradually
being replacedby a new intellectualstratum.He has
since reconsideredthis idea (Szelenyi 1986-1987).
Szelenyi's findingsabouthousingdistributionarealso
consistentwithhumancapitaltheory(KelleyandKlein
1977), but emphasizea differentcausal mechanism.
AmericanSociological Review, 1992, Vol. 57 (August:524-539)
PROPERTYRIGHTSAND STRATIFICATION
UNDER SOCIALISM
groups that benefit, reveals several intriguing
contrastswith marketeconomies. In a centrally
plannedeconomy,capital,producers'goods, and
even laborand consumers'goods are produced
or allocatedaccordingto thepreferencesof planning officials ratherthan in responseto market
signals. In other words, productionis "demand
constrained"in marketeconomies,but"resource
constrained"in the centrallyplannedeconomies
(Kornai1980). Most enterpriseaccountingprofits flow directlyinto the coffers of government
jurisdictionswith ownershiprights over enterprises. Governmentagencies in these jurisdictions reallocatethis wealth to organizationsas
investmentcapital,budgetarygrants,public services, or income.
Whatmechanismsaccountfortheunequaldistributionof resources among organizationsin
plannedeconomies, and how do these resource
flows stratifysocialistsocieties?Do these mechanisms differ from those found in capitalism?
These questions requirea focus on the power
and interestsof organizationsratherthanon the
powerandinterestsof elites. The relevantcausal
processes are shaped by a regime of property
rights that serve to define the distinctive economic institutionsand fiscal practicesof central
planning.Althoughmarketmechanismsbegan
to emergemore thana decade ago in some centrallyplannedeconomies(e.g., HungaryandChimechana),my concernis withtheredistributive
nismsthatdefinecentralplanning,not with their
recenterosion.
EXPLAININGSEGMENTATIONIN
PLANNEDECONOMIES
Moneyincomesandjob benefitsin socialisteconomies are clearly stratifiedby economic sector
and characteristicsof work organizations(Bian
1990;Domanski1988, 1990;Lin andBian 1991;
Walder1986,pp. 39-68; Walder1990).However, the causalmechanismsbehindthese relationshipshave not receivedsufficientattention.
Explanationsof stratificationin marketeconomies focus on two separatequestions:(1) why
some organizationshave a greatercapacity to
compensatelabor,and (2) why some organizations choose to compensateworkersat higher
levels. Withfew exceptions,however,theunderlying institutionalor marketprocessesareeither
absentor greatlyalteredin plannedeconomies.
For example,althoughlargefirmsmay pay high
wages in both marketand plannedeconomies,
the causalprocessesmay differ.
525
"Sociological"or "structural"
explanationsof
how work organizationsin market economies
obtainthe resourcesto pay high wages point to
levels of profit.Organizationshave "differential
capacitiesto realize profits on the basis of exchangeadvantages"(Fligstein,Hicks, and Morgan 1983, p. 297). These advantageseitherkeep
profitshigh relativeto thenumbersemployed,or
stabilizethemovertime.Economistsreferto this
as "capitalrents"or high relativereturnsto capitalinvestment(KatzandSummers1989,pp.21316). Firms in industriesdominatedby a small
numberof firmscan limit competitionandprice
their productsat high levels, whereas firms in
morecompetitiveindustrieswill havelowerprofit
margins.Firmsin industriesthatenjoy largeand
stable governmentcontractswith cost-overrun
provisions(typicallydefenseandaerospace)also
have high profitmargins.Finally,capitalintensive firms have higher labor productivitythan
labor-intensivefirmsandcan affordto pay higher wages (See Kalleberg,Wallace,andAlthauser
1981, pp. 653-54).
Theseexplanationsarenotplausiblein planned
economies, but not because firms are publicly
owned and not profit-oriented.In fact, some socialist firms do have higher profits because of
priceadvantages,assuredsales to stateagencies,
or superiorcapital equipment.These explanations are not plausiblebecausefirms in planned
economies have no clear and enforceablerights
to retainprofitsandallocatethemat theirdiscretion.The hallmarkof "redistributive"
economies
is thatno clearlegal or substantivestandardsexist for determiningthe rightsof enterprisesto the
earningsfromcapitalinvestedoutof publicfunds.
Financialplannersroutinelyredistribute
earnings
among enterprisesin their jurisdictions,skimming off "excess"profitsfrom enterpriseswith
high accountingprofits to subsidizethose with
low profitsor accountinglosses (Kornai1986a,
pp. 14-19). In Hungaryin the 1970s, almost300
taxes or subsidiesenabledplannersto takefunds
from firms or grantthem more, and few of the
regulationsappliedequally to all firms (Kornai
1986b,p. 1696). Redistributionfavoredthe less
profitable.Balancesheetdatafor all state-owned
firmsin Hungaryshowedno correlationbetween
grossandnetprofits,orbetweenprofitabilityand
investment,and a strong negative relationship
between gross profitsand net subsidies(Kornai
1986a,p. 16). Researchon Chinahas documented the sameredistributivepracticesin largecities
and ruraltowns (Oi 1990, forthcoming;Walder
1992). Clearly,when the propertyrightsof en-
526
terprisesandgovernmentunitsareill-definedand
flexible, what determinesa firm's capacity to
compensateemployees is not its earnings,but
the net flow of revenuesbetweenenterpriseand
government.The net flow of revenue,in turn,is
determinedby processes that affect redistributive decisions,not by the marketconditionsthat
affectthe firm's earnings.
Why do some work organizations,given the
capacity to compensatelabor at a given level,
choose to do so? The abilityof laborto extract
wages abovemarketclearinglevels is referredto
by economistsas "laborrents"(Katz and Summers1989,pp.227-47). Explanationsof thisphenomenonby economistsrangefrom the need to
compensatehighquality,productivelaborathigh
wages,theneedto compensatefordifficultworking conditions,a desireto wardoff unionization,
to the existence of "implicitcontracts"that restrictemployment,meet local normsof fairness,
and raise compensationabove market-clearing
levels to discourageshirkingand reducemonitoring costs (Akerloff 1982, 1984; Azariadis
1975; Dickens and Katz 1987; Katz and Summers 1989). Such explanationsaccountfor economic segmentationto the extentthathigh quality laboror greaterinvestmentin trainingis requiredin advantagedsectorsand firms,and this
reasoningis buttressedby the observationthat
the relativecost of high wages is inverselyproportionalto capitalintensity(Dickens and Katz
1987;Kruegerand Summers1987).
Ontheotherhand,sociologistsandsome institutionaleconomistshave stressedthe poweremployees derive from collective organizationor
have pointedto characteristicsof the organizationof production(BaronandBielby 1980;Bibb
and Form 1977; Kallebergand Sorensen 1979;
Freemanand Medoff 1984). Unions tend to be
concentratedin industrieswith high profitmargins because such employersare betterable to
compromiseandhavetheresourcesto offerworkers incentivesto compromise(Daltonand Ford
1977). From an evolutionaryperspective,powerful unions in weak firms may cause the firms
to relocate or fail (Cohn 1990). One result of
conflicthasbeen the creation
labor-management
of internallabormarketsin the large profitable
firms, which in turnprovide employees with a
stake in job security and organizedcareer advancement (Althauser and Kalleberg 1981).
Workers derive power where employers have
moreresources,andtheyestablishrightsthatprotect themselves from labormarketcompetition
(Kalleberg,Wallace,andAlthauser1981).
REVIEW
AMERICANSOCIOLOGICAL
Such processes cannot accountfor stratification in plannedeconomies,butnotbecauselabor
is powerlessorbecausefirmsdo notvalueskilled
andproductiveemployees.Clearly,informalbargainingand implicitcontractsbetweenmanagement and employees occur in socialist economies (SabelandStark1982;Stark1986;Walder
1987).However,thesebargainstakeplace under
differentinstitutionalconditions. In the Soviet
Union, legal provisionsor de facto "jobrights"
preventedemployers from firing or laying off
workers,restrictedtheirabilityto set wage bills
andpaylevels, andpreventedworkersfrommaking certainkinds of geographicaland interfirm
transfers(Granick1987, pp. 23-65). In the more
rigidurbanChineseinstitutions,laborimmobility in stateowned firms has led to ratesof interfirm mobility much lower even than Japan's
(Walder 1986, pp. 68-81).2 Under such conditions, explanationsof compensationdifferences
must proceed from very differentassumptions
aboutthe options,preferences,and strategiesof
managersand workers.Common structuralexplanations encounter similar difficulties. In
plannedeconomies,independentunionsarenonexistent,andvariationsin theextentof collective
organizationamongworkerscannotaccountfor
compensationdifferencesbetweensectors.Moreover,thejob structuresandpay ladderscentralto
many sociologicalaccountsof labormarketprocesses are comparativelysimple, even where
workersoften stay with firms for much of their
workinglives (Walder1986, pp. 76-81).
If themechanismsspecifiedby theoriesof stratificationformarketeconomiesareabsentorgreatly altered,what processes do segment planned
economies? Studies of sectoral inequality in
plannedeconomieshave not examinedthe redistributiveprocessesunderlyinginequality.By focusing on factorsthatmay affect the capacityof
firms to compensateemployees, I offer a rudimentaryinstitutionaltheory of sectoral differences in compensation.The unit of analysis is
the work organization,and the outcome to be
explainedis variationin the ability of work or2In the presentsurvey,the averagenumberof jobs
held by employeesaged 40 to 54 in the largeindustrial city of Tianjinis just undertwo, less thanhalf the
figure for Japanand less thanone-fifth the figure for
the United States (Hashimotoand Raisian 1985, p.
724). Among those in Tianjinwho have workedfor
31 to 35 years,45 percenthaveneverchangedjobs
almost double the figure for Yokohama and more
than five times the figure for Detroit (Cole 1979, p.
64).
PROPERTYRIGHTSAND STRATIFICATION
UNDER SOCIALISM
527
ganizationsto providethe subsidizedhousingand remitteddirectlyto state coffers afterfixed deextensive benefits and services characteristicof ductionsfor incentive pay. Despite long-standredistributiveeconomies.3
ing reformsin HungaryandChinain which state
enterpriseswereallowedto retainsignificantperPROPERTY
RIGHTSAND REVENUEFLOWS centages of theirprofits,the scale of redistribution remainedvast.In Hungaryin the late 1970s,
Any explanationof stratificationmustbe rooted for example,totalsubsidiesgrantedto state-secin an explicit conceptionof the incentives and tor firms roughlyequalledtotal profits (Kornai
constraintsthat institutionsprovide individuals 1986a, pp. 14-15; 1986b, p. 1696). In Chinain
andorganizations.
Differentinstitutionalprocess- the mid-1980s,in a nationalsampleof 429 enteres can producesimilaroutcomes, thereforethe prises an averageof 78 percentof gross entercausal mechanismsare as importantas causal prise profits were still being taxed away, even
relationships.Economicinstitutionsareconfigu- aftertaxes on sales or value addedhadbeen levrationsof rules that govern transactionsin the ied (Reynolds1987, p. 89).
In additionto the extractionof enterprisereveeconomy. Institutionalrules embody property
rights,normsregardingeconomic behavior,and nues and accountingprofits,redistributionalso
meansof enforcement;stateregulationis central includesthe large-scaleprovisionof in-kindinto theircreationandmaintenance.
AlthoughNorth come, such as housing,by governmentagencies
(1981, 1991)developedthisinstitutionalconcep- and workorganizations.This processwas hightion to explain economic growth, it also sheds lightedin Szelenyi's (1978, 1983) earlyworkon
light on processesof stratification.Whatis most social policy in easternEurope.Since 1949 in
importanthere is not North's emphasis on the urbanChina,forexample,virtuallyallurbanhousclarity and enforceability of private property ing has been built and maintainedby local govrights, but what government entities exercise ernmentsorworkorganizations.
Nationwide,only
propertyrights- especiallythe rightto operate 18 percentof families live in privatelyowned
a productiveassetandderiveincomefromit (Fu- housing, virtuallyall of this built before 1949
rubotnandPejovich 1974, p. 3). Propertyrights (Lee 1988, p. 398). The rest live in publichousspecify rules for the distributionof income, and ing, paying rentsthatbarelycover half the curin plannedeconomiesincomerightsaredispersed rentmaintenancecosts andthataverageless than
across a hierarchyof governmentjurisdictions 3 percentof the family income (Lee 1988, pp.
(Pryor1973). The processesthatgovern the re- 392-93; People's Republic of China 1990a, p.
distributionof wealthin a centrallyplannedecon- 9).4 Anotherimportantformof in-kindincomeis
omy - taxation and finance - can therefore be the wide rangeof servicesandbenefitsprovided
viewed as a resultof the opportunitiesand con- by workorganizations(WhyteandParish1984,
straintsprovidedby a special configurationof chap. 4; Walder 1986, chap. 2). By the early
propertyrights.As governmentofficials anden- 1980s in China,nationalexpendituresfor insurterpriseexecutives pursuetheir ends in accord ance, pensions, and varioussubsidiesfor urban
with these opportunitiesand constraints,some wage earnersexceeded the national wage bill
organizationsareadvantagedover others.
(Lardy1984).
Theseinstitutionsframean immenseredistribThe processesthatgovern such a massive reutive process.In China,as in all plannedecono- distributionof nationalincome must be at the
mies past and present,the processbegins with a centerof any plausibleaccountof sectoralstratimassive extractionof accountingsurplusesfrom fication.Giventhe scopeof redistribution
among
industry,primarilyin the form of taxes. In the organizations,a focus on theabilityto retainprof"traditional"
centrallyplannedeconomy,all prof- its, not the abilityto earnthem,is essential.Givits fromindustrialandcommercialactivitieswere en the scope of in-kindincome, nonwageforms
of compensationprovidedby workplacesmust
I
Althoughthe provisionof housing, benefits, and receive special attention.The institutionsthat
services is the most characteristicform of income in govern the redistributionprocess must be charredistributiveeconomies,recentstudiesof segmentationhave focusedon wages - the formof compensation most directly subject to governmentregulation
(Bian 1990, Domanski 1988, 1990). Szelenyi (1978,
1983) examined the distributionof housing to individuals,but not the capacityof organizationsto provide it.
I In our 1986 surveyof Tianjin,77 percentlived in
public housing providedby workplacesor city government,and only 1.6 percentexpected to purchase
privatehousing in the future.Respondents'families
paidan averageof 1.6 percentof theirmonthlyhousehold income on rent.
528
acterizedclearlybeforeturningto thefactorsthat
advantagesome organizationsanddisadvantage
others.These institutionsinclude:(1) the fiscal
structureof the state - a nested hierarchyof
budgetaryjurisdictionswith their own revenue
bases and propertyrights;(2) the taxationprocess - the fiscal mechanismwherebygovernmentswithpropertyrightsoverenterprisesregulate the flow of revenues between themselves
and enterprises;and (3) the investmentprocess
the financial mechanism whereby governmentsregulatethe flow of revenues.5
TheFiscal Structureof the State
China'snationalbudgetis a nestedhierarchyof
independentbudgets- eachgovernmentunitexercises propertyrightsover firms undertheirfinancialjurisdiction.These firms form the revenue base of that governmentunit (thereare.no
tangiblerevenuesfrom personalincome taxes).
Whatdistinguishespropertyrightsin theChinese
economy is not that enterprisecapital is "state
owned"versus"privatelyowned,"but thateach
governmentjurisdictionexercisespropertyrights
over its subordinateenterprises(Wong 1986;
Granick1990,chap.2).6 This bureaucraticeconomy, far frombeing a monolith,is composedof
thousandsof governmentjurisdictionsof varying sizes, each of whichseeks to expandits revenues by capturinginvestment, subsidies, and
grants.
In this fiscal structure,revenuesare collected
by all levels of government- revenuesharing
moves up to the center,not down to the localities. In an arrangementthatresemblestax-farming, each yeareach governmentlevel turnsover
a negotiatedquota of its revenues to the next
higher level of government.The revenue base
for any governmentjurisdictionis composedof
revenuesremittedby thejurisdictionsbelow and
I The descriptionsthat follow are based on interviews in 55 enterprises,government bureaus, and
banksin seven large Chinesecities from May to August 1986 (Walder1992).
6 In China and other socialist economies, "state"
and "collective"ownershipare separateadministrative types of governmentownership with different
wage scales and insurancecoverage (Walder 1986,
chap. 2). Some studies have used the distinctionbetween state and collective ownershipas an independent variablein multivariateanalyses (Lin and Bian
1991, p. 659). My concern is with the government
level thatexercisesownershiprights,not the administrativecategory.
AMERICANSOCIOLOGICAL
REVIEW
revenuesgeneratedby the enterpriseslodged in
that government'sbudget. Each local government has ownershiprightsover a specific set of
enterprisesandthese rightsarereflectedin a tax
systemthatgives the governmentthe rightto set
effective tax rates for individual enterprises.7
Thus, centralgovernmentrevenuescome from
revenuesfrom the provincesand revenuesgenerated by the (typically) large industrialcomplexes operatedby centralministries.Provincial
governmentrevenues,in turn,come from revenuesremittedby cities anddistrictsandrevenues
generatedby the enterprisesoperatedby provincial bureaus.This fiscal structureis replicated
down to the level of the urbanstreetcommittee
or ruralvillage.
The TaxationProcess
At all levels of the fiscal hierarchy,government
propertyrightsareexpressedin the systemof taxation. In redistributiveeconomies, tax rates are
tailoredto each enterprise.Enterpriseshave no
rights to profits deemed "excess" by planning
authorities,andtheyexpect suchprofitsto be ex.propriated
(Walder1989, 1992).In each government jurisdiction,taxation is redistributivemoreprofitableenterprisesaretaxedathighrates
in orderto subsidize less profitableenterprises
and to financenonprofitorganizationsand governmentagencies.8Firmsthatarechroniclosers
and requireannualsubsidiesare usuallykept in
operation,especiallyif large,for severalreasons.
Taxes on their volume of activity may still be
substantial;theirproductionmay be essentialto
I Some large ministry-ownedenterprisesmay also
be taxedby thelocalgovernmentjurisdictionsin which
they arelocatedto compensatefor costs of infrastructure and public services. This createsjoint property
rightsarrangementsat the top of the hierarchy,from
the point of view of the rightto derive income from
assets (Walder1992).
8 Taxationactuallytakesplace in two stages. First,
turnover,sales, or value-addedtaxes are levied on
gross receipts.Second, accountingprofits are calculated based on these net receipts and various taxes
and other charges are levied on accountingprofits.
This means thatgovernmentrevenuesdependon the
volume of economic activityas well as on the profitabilityof a firm in an accountingsense. In fact, profit
taxes account for only 21 percentof revenues from
industryand commerce(People's Republicof China
1990b,p. 566). Thereforemany firms thatlose money in accountingtermsmay actuallybe net contributorsto local revenuesbecausethey probablypay substantialfirst-stagetaxes to the local government.
PROPERTYRIGHTSAND STRATIFICATION
UNDER SOCIALISM
otherenterprisesin thejurisdiction;or the enterprise providesemploymentand social services
for employees who would otherwiseturnto the
governmentfor relief.
Taxationis thereforea flexible tool for regulating the flow of revenuesbetween enterprises
and government.In China, local governments
have wide discretionand may exempt any proportion of revenues or profits from taxation,
whereasthenationaltaxratesmaynotbe changed.
Thus, firms operate under "soft" budget constraint,because local governmentabsorbsboth
losses and"excess"revenues(Walder1989).Fiscal solvency is the only constrainton the redistributiveactivity of a governmentjurisdiction.
When the local budget is large and has many
sourcesof revenue,the ability of local governments in the shortrunto soften tax assessments
is high; in the long run, bargainingwith enterprisesleaves substantialslack in enterprisebudgets, and this slack will fund the discretionary
constructionof facilities and provisionof benefits. Whenthe local budgetis small andhas few
sources of revenue,tax enforcementis less lenient,andin the long runless slackwill accumulate in enterprisebudgets.
TheInvestmentProcess
Investmentfinanceis the mechanismwherebya
local governmentallocatescapitalto enterprises
to expandor upgradetheirproductionfacilities.
Investmentfollows a planner'spreferences,and
these preferencesare not necessarilyguided by
profitconsiderations.For example,local supply
shortages(especiallyfor steel) or nationalplanning priorities(to stimulateexports,for example) are also importantconsiderations(Walder
1989, 1992).
inplannedeconomies,capitalwas
Traditionally
grantedto enterprisesoutright,and repayment
was irrelevantbecausethe governmenttook virtually all profits. In a modified economy like
China's,investmentis a formalloan to be repaid
with interest,althoughrepaymentis oftenhighly
subsidizedby governmentat variablerates.9For
largeinvestmentprojects,loanrepaymentschedI Even though most loans are now administered
throughbanks,themajorityof thefundslentaregrants
from governmentbudgetsthat are allocatedto firms
throughbanks. Thus, banks act as accountantson
loans.The conflictsof interestandtrade-offsinvolved
in financingwith publicfundsversusbankcapitalare
describedelsewhere(Walder1992).
529
ules are short- typicallythreeyears,and most
firmsrequirelargetax exemptionsto repaysuch
loans. Typically, enterprisesare allowed to deducttheirannualrepayments- interestandprincipal - from the income subjectto taxation.In
thenotuncommonextremecase,enterprisesmay
be exemptedfrom most taxes while they repay
theirinvestmentloans.Trueto the redistributive
characterof the economy, the investmentprocess is highly subsidizedand has only partially
lost the characterof a governmentgrant.
STRATIFICATION
MECHANISMS.
Unlike salaries,pensions, and labor insurance,
whicharelegally includedin enterpriseaccounts
as a cost of production,housingandotherbenefits thatworkorganizationsprovidefor theiremployees arediscretionaryexpendituresthatmust
be fundedfrom several sources.First,an enterprise sets aside a portionof its retained(aftertax) profitsfor the fundingof benefits.Second,
revenuesandmaterialresourcesmay be diverted
fromotheruses, butcountedas a cost of production. For example,in a largeinvestmentproject,
constructionmaterialsmay be divertedfor housing.Third,workorganizationstypicallyhave significant"off the books" income from cooperative ventureswith other firms, bartertrade,or
cross-investment(Walder1989).
A workorganization'sabilityto deliverbenefits and servicesto its employeesis a functionof
the relativeindulgenceof governmentagencies
thatregulatefinancialflows. Whenindulgenceis
high, the packageof tax obligationsand subsidies allows the organizationto retainproportionately morefunds,andthe accountingof a firm's
costs, inventories,and cash reservesis more lenient. When indulgenceis low, enterprisesface
unfavorablerevenue flows and more strictenforcementof accountingandtaxregulations.The
ability of organizationsto win privilegedtreatmentin these budgetaryandfiscal processeshas
directconsequencesfor the standardof living of
its employees. Thus, the dependentvariableis
the ability or willingness of governmentagencies to granta work organizationthe slack resourcesnecessaryto compensateits employees,
regardlessof the size or directionof currentrevenueflows betweenthe work organizationand
government.
Two possible causes of variationin net revenue flows betweengovernmentandworkorganizationsare:the degreeto which the localityhas
revenues in excess of its budgetaryobligations
530
AMERICANSOCIOLOGICAL
REVIEW
and can affordto be lenient, and the degree to ResourceDependence
which the organizationcan induce government
Given the budgetarycapacities of government
agenciesto treatit favorably.
jurisdictions,organizationsthatthe government
dependson for productsor tax revenuesare faVariationin GovernmentIncentivesto
voredin the redistribution
process.ResourcedeExtractRevenue
pendence gives a work organizationenhanced
Stratificationamong organizationsreflects the leveragein bargainingforfavorabletermsof taxfiscal structureof the state,i.e., the higherin the ationorfinance.Resourcedependencemay arise
governmenthierarchy,the largerthe budgetand from the natureof the organization'soutput.If,
the more numerousand lucrativethe sourcesof for example, steel is in shortsupplylocally and
revenue.China'scentralbudgetincludestaxrev- there are few steel plants in the locality, those
enuesfromaround30 province-leveljurisdictions plantshave a favorablebargainingposition.Reas well as taxpaymentsfromthehundredsof large source dependencemay also be a result of the
industrialcomplexesover which nationalminis- organization'searnings.An organizationthatsuptrieshold propertyrights.A typicalruralcounty plies a largepercentageof a government'sreveor city district,on the otherhand,may have 10 to nueshasa favorablebargainingposition,because
20 relativelysmallenterprisesthatcontributerev- any slowdown in productionaffects local reveenuesdirectlyto it. Governmentunitswitha large nues. Specific political interests may also put
revenue base have a greatercapacity to allow some organizationsin favorablebargainingpoworkorganizationsto retainslackresourcesand sitions.If, for example,a Mayor'slocal plansare
a weakerinterestin rigorousenforcementof ac- based on the stimulationof foreign investment,
countingregulations.Moreover,the greaterthe he or she has a special interestin the success of
numberof revenue sources,the weakerthe ca- the firstfew joint-venturefirms.Thus,thejointpacity of governmentto monitorfirms and en- venturefirms would have a privilegedposition.
force compliancewith tax and accountingregu- The moredependentlocal officials areon an orlations.This variablehas a verticaland a hori- ganization'ssuccess,themoreindulgenttheywill
zontaldimension:the higherup in the hierarchy, be in financialdecisionsthataffecttheprosperity
the largerarethe governmentbudgets,from vil- of the organization(Laky 1979).
lages and streetsto the provincialand national
level, but amongjurisdictionsat the same level, EVIDENCEFROMA CHINESECITY:
highly industrializedareashave a largerrevenue DATA AND VARIABLES
base thanless industrializedareas.
Largebudgetsmay affect the incentiveto ex- The dataarefrom a 1986 surveyof a multistage
tractrevenue in two ways. First, large budgets stratifiedrandomsample of 1,011 households.
may simply indicate"surplus"revenuesrelative The samplewas drawnin 1983 in the urbandisto anticipatedexpenditures.Second, even if all trictsof Tianjin,China'sthirdlargestcity, a mabudgetswere equallyconstrained,a jurisdiction jor seaportand center of heavy industry.From
with a largebudgetand many firms has less in- the 124 urbanwards(literally"streetoffices" or
centiveto extractrevenue'fromany single enter- jiedao banshichu) with a totalpopulationof 4.2
prisethandoes ajurisdictionwith a smallbudget million, 36 wards were chosen purposivelyto
and few firms, because it receives smallerpro- ensurea mix of neighborhoodtypes.A wardconportionsof its revenuesfrom any single firm.In tainsan averageof 8,000 householdsthatarediaddition,monitoringmany firms is more costly vided into smallerresidents'committees(jumin
thanmonitoringa few. Whateverthemechanism, weiyuanhui)containinganaverageof 400 househigh-levelgovernmentjurisdictionshaveless in- holds.Withineach ward,one residents'commitcentiveto be stringentin tax andbudgetarydeci- tee was selectedrandomly.Householdswithinthe
sions towardany single work organizationthan
do low-level jurisdictions.'0
enjoy overlappingmembershipsin governmentalor
partybodies will exercise greaterinfluence.Csanddi
'?Thenetworkties of a work organization'sdirec- (1989), employingdataon Hungarianindustry,found
tor may also influencegovernmentdecisions. Direc- thata firmdirector'smembershipin local or regional
tors with high civil service ranks and long careers party organs was correlatedwith high levels of inlocallyhavebettercontactswithhigherdecision-mak- vestmentin the firm,even aftercontrollingfor size of
ers. Among directorsof the same rank, those'who the firm.
PROPERTYRIGHTSAND STRATIFICATION
UNDER SOCIALISM
residents' committees were sampled from the
wardregistersaccordingto quotasset to match
the occupationalprofile of the city in the 1980
census.
The householdswere interviewedannuallyby
sociologists workingwith the city government;
Lin and Bian (1991) reportedfindings from a
1985 surveyof a differentsampleof respondents
drawnfromthesehouseholds.In 1986,the wageearnerin each householdwhose birthdate was
closest to October 1 was interviewed.Respondents providedinformationabouttheirpersonal
background,work experience,income, the living conditionsand income of their household,
and characteristicsof their work organization
(See Walder, Zhou, Blau, Ruan, and Zhang
1989).
Although this is a representativesample for
both householdsand individuals,I treatit as a
sample of work organizationsin orderto draw
conclusions about processes that affect the resourcesavailableto organizations.Therearetwo
problems with this procedure. First, because
workers often reside in workplace housing
blocks,some individualsin the samplemay work
for the same organization.Within each of the
36 residents' committees, sampled cases that
matchedon responsesto the workplacevariables
wereidentified."Outof 1,011respondents,there
were 115 such cases, 25 of whom were concentratedin one factoryhousingcomplex. Cases in
which respondentsapparentlyworked for the
same organizationwere weightedby the inverse
of the numberof respondentsfrom thatorganization.Second,becausethe sampleis not a representativesampleof organizations,individuals
who work for large organizationshave a higher
probabilityof being selectedthando those who
work for smaller organizations.To correctfor
the bias introducedby oversamplingof large
work organizations,observationswere weighted by the inverse of organizationsize divided
by the meanof such weights in the sample(Parcel, Kaufman,andJolly 1991, p. 53). (Observations were not weighted when the individualis
the unitof analysis.)
" Caseswereconsidereda "match"if theywere
fromthe sameresidents'committee,hadthe same
codingsforsector,budgetary
rank,andtypeof legal
ownership,had estimatesof numberof employees
thatwerewithin20 percentof thehighestvalue,and
whoseresponses
to atleast9 of the11questionsabout
theavailability
of benefitswereidentical.
531
IndependentVariables
Budgetaryrank.This six-categoryordinalvariable indicatesthe positionof the workorganizationin the state'sfiscal hierarchy:Ministry,City,
District Bureau,City Company,District Company, and Street.These categoriesdesignatethe
administrativelevel thathas ownershiprightsor
budget-makingauthorityover the work organization.Such informationis widely knownin urban China. Every urbanresident knows what
governmentorgantheirworkunit is "under"theinformationusuallyis printedon thestandardized signs thatmarkthe frontgates of organizations. This variableis a measureof the size of
budgetof the governmentunitto whichthe work
organizationis attached.The highertherank,the
largerthe budget, and the greaterthe expected
abilityof the relevantgovernmentjurisdictionto
allow the work organizationto retainslack resources.This measureof fiscal resourcesof various levels of stateadministration
in Chinaindicates in turnthe ability to provideresourcesto
organizationsin whichthey have an interestand
ownershiprights.
Workplacesize. This variableis the respondent'sestimateof thenumberof peopleemployed
by theirwork organization.Such informationis
includedin thereportsandspeechesthatChinese
managersmakeregularlyto theiremployees,and
respondentsare usually confidentof their estimates.Workplacesize is a measureof resource
dependencefor enterprisesthat producegoods
and servicesand arethus sourcesof revenuefor
local governments.Enterpriseswith largernumbersof employeesgenerallyproducemoregoods
or servicesandthusturnover largetax revenues
from their sales. Because I expect the effect of
size to diminishas establishmentsize increases,I
use a naturallog transformation
of the variable.'2
Economicsector.Workorganizationsarecoded intoone of six economicsectors:manufacturing, service,commerce,education,government,
and other. The governmentsector contains the
class"of
largestproportionof the "redistributive
elite theory:In this sample,38.2 percentof governmentsectoremployeesareadministrative
cadres (officials), while in the educationsectorthe
12
Workplacesize and budgetaryrankare correlated at r = .235, p < .001. Size does not increasemonotonically with rank, however - the average workplace size at the ministrylevel is 1,966, but is largest
at the second highestrank,municipalgovernment,at
2,548.
532
comparablepercentageis 9.8 percent, and in
manufacturing,5.9 percent.Plannersare most
dependenton the manufacturingsector for resources- it suppliesotherorganizationsor consumersin the jurisdictionandprovidesthe bulk
of tax revenues.Nationwide,the manufacturing
sectorprovided76 percentof all governmentrevenuesin 1988,netof governmentborrowing(People's Republicof China1990b,p. 569). Government officials are less dependenton the service
and commercesectors- these sectorscontributed only 9 percent to state revenues in 1988
(People's Republicof China 1990b,p. 569). Finally, planningofficials are least dependenton
theeducationandgovernmentsectors,whichprovide no revenuesandare a drainon resources.
DependentVariables
Benefitsand services.The maindependentvariables arewhetherthe respondent'sworkorganization providedemployees with 11 benefits or
servicesthatrequiresignificantinvestmentof resources.These 11 benefits are not benefits that
laborinsurancelegislationrequiresorganizations
to provide- pensions,disabilitypayments,and
medicalinsurance- and whose costs (in enterprises)are deductedfrom gross earnings.These
are optionalbenefitsthatmust be fundedby the
organization'sslack resources.They include an
enterprisemeal service that typically provides
subsidizedmeals up to 3 times a day, an infant
daycarecenter,a kindergarten,an on-site medical clinic,bathingfacilities(few urbanapartments
have them), a retail store for employees only,
sportsfacilities, an auditorium(which often becomes a freecinemain the evenings),a libraryor
readingroom,organizedgroupvacationsat subsidized prices, and a commuterbus service that
enables employees to avoid crowded and slow
orbicyclinglongdistances.Dumpublictransport
my variablesindicatethe presenceof each of the
11 benefitsor services. A final continuousvariable is simply a countof the numberof these 11
benefitsreportedby respondents.
These benefitsrepresenta form of nonmonetaryincome for workersthatis characteristicof
redistributiveeconomies. The greaterthe range
of the benefits providedby the workplace,the
greaterthe "income"of its employees. Table 1
shows the availabilityand use of these benefits.
Most employees use these benefits when they
are available,except for daycareand kindergartens whose use is relatedto the life cycle, Because employeestend to remainwith theirwork
AMERICANSOCIOLOGICAL
REVIEW
Table 1. Availability and Use of Workplace Benefits:
Tianjin,China, 1986
Workplace
Benefit
If Available,
Percentof
Workplaces PercentWho Have
Offeringthe Benefit Used the Benefit
Medical clinic
55
97
Meal service
55
82
Bathingfacilities
55
96
Groupvacations
46
67
Library
41
84
Infantdaycare
30
32
Auditorium
23
93
Retail store
21
91
Kindergarten
19
36
Sportsfacilities
14
63
Commuterbus
Numberof cases
6
58
910
910
organizationsfor long periods,most employees
probablyuse these benefitsat some time during
their tenure.The simple measureof presence/
absence of benefits should be sufficient to explore sectoral differences in benefits - more
refinedmeasuresarenot available.
Housing. Workplacesare an importantproviderof housingin urbanChina,and housingis
easily thecostliestandmostvaluablebenefitprovided to employees.In the sample,occupantsof
workplace housing lived in somewhat larger
apartmentsand had been allocateda new apartment more recentlythanrespondentsnot living
in workplace apartments.Respondents overwhelmingly named their work organizationas
the most importantsourceof futurehousing.Respondentswereaskedto namethe sourceof their
currenthousing.Possible responseswere "your
own work unit,""workunit of a family member,""municipalhousing,""privatehousing,"and
a few residualcategories.Responseswere used
to createthe dummyvariable"workplacehousing"- responsesof "yourown workunit"were
coded 1, all others were coded 0. The housing
variableestimatesthe capacityof work organizations to providehousing for theiremployees.
Because this variablerefers to consumptionof
benefits by individuals,it is affectedby the respondent'scharacteristics.As a result, several
individual-levelcontrol variables are included
when examiningorganization-leveleffects.
PROPERTYRIGHTSAND STRATIFICATION
UNDER SOCIALISM
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AMERICANSOCIOLOGICALREVIEW
534
Table 3. Weighted OLS Coefficients For Regression of
Numberof BenefitsOfferedOn WorkplaceCharacteristics:Tianjin,China, 1986
Workplace
Characteristic
Budgetaryrank
(1)
.558***
(.072)
Workplacesize (in)
Equation
(2)
(3)
.180**
(.070)
.105
(.072)
.884***
(.060)
.749***
(.071)
Economic sector
1.738***a
(.262)
Manufacturing
Service
-627**c
(.225)
Education
1.290***b
(.245)
Government
1.935***a
(.266)
-.762d
(.441)
Other
R2 (adjusted)
.056
.223
.288
Numberof cases
993
993
993
<.001
**p<.01
*
*p<.05
Note: Numbers in parenthesesare standarderrors.The
omittedcategoryforeconomicsectoris "commerce."Alphabetic superscriptsindicateresultsof significancetest of differences between coefficients. Differences between coefficients with differentsuperscriptsare significantatp < .05.
ANALYSIS
For each of the 11 benefitsand services,logistic
regressionwas employedto analyzethe effect of
workplacecharacteristicson the probabilitythat
the benefit or service is offered. Results are reportedin Table2.
After controllingfor workplacesize and economic sector, the higher the budgetaryrankof
the controllinggovernmentunit,the more likely
are workplacesto offer meal services, a kindergarten,bathingfacilities, an auditorium,group
vacations, and commuterbuses. However, the
higherthebudgetaryrank,theless likelyareworkplaces to offer infantdaycare,a medical clinic,
or a retail store. These inconsistentresultsprovide only partial supportfor the causal role I
have attributedto the state'sfiscal structure.
Resultsaremoreconsistentfor workplacesize:
Controllingforbudgetaryrankandeconomicsector, workplacesize is stronglyandpositively associatedwiththeprobabilitythata benefitis available. The coefficients for 9 of the 11 equations
are statisticallysignificant,positive, and in most
cases over four times theirstandarderrors.The
results are consistent with the propositionthat
government planners favor organizations on
which they aremost dependent,i.e., largeorganizations.
Coefficientsfor economic sectorprovide additionalsupportfor the resourcedependenceargument.Authoritiesare most dependenton the
manufacturingsector for revenue and physical
outputand coefficients indicatethat the manufacturingsector is significantlymore likely to
provide benefits than the excluded category of
commerce. The size of these coefficients also
suggests that workplacesin the manufacturing
sectoraremorelikely to offer thesebenefitsthan
are those in the service sector.Among revenuegeneratingorganizations,those in manufacturing areclearlyfavored.
Workplacesin themanufacturingsector,however,arevery similarto workplacesin the education or governmentsectors in the provision of
benefits. Judgingby the size of the coefficients
and the patternof significantcontrastswith the
excluded category, the three sectors are, after
controllingforworkplacesizeandbudgetaryrank,
roughlyequalin provisionof benefits.The simieducalarityof workplacesin themanufacturing,
tion,andgovernmentsectorsin provisionof benefits suggests thatresourcedependencemechanismsoperatealongsidethekindsof powermechanismsspecifiedin elite theories.'3Workorganizationsin educationorgovernmentdo notgenerate revenues,andthe governmentsectoralso includesa largeconcentrationof the"redistributive
class"of elite theory.Ontheotherhand,thisfinding suggeststhatanybudgetaryprivilegesaccorded to workorganizationsin governmentarerelatively minor,at least by this roughmeasure.
To summarizethe patternof these effects, the
total numberof benefits offered by the respondent's workorganizationwas analyzedin a least
squaresregressionframework(Table3). The resultsareconsistentwithresultsfromthe separate
logit models. Differencesin coefficients and R2
acrossequations1 through3 indicatethe relative
impact of budgetaryrank, workplacesize, and
economicsector.Thepositiveassociationof budgetaryrankwithnumberof benefitsoffereddoes
13Thecoefficient
in education
forworkplaces
may
be inflatedby thefactthatschoolemployeesusually
haveaccessto a numberof benefits- mealservices,
libraries- thataretrasportfacilities,auditoriums,
ditionallyprovidedby schoolsfortheirstudents.
PROPERTYRIGHTSAND STRATIFICATION
UNDER SOCIALISM
Table 4. Logit CoefficientsFor Regressionof Workplace
Housing on Selected Independent Variables:
Tianjin,China, 1986
Equation
IndependentVariable
Budgetaryrank
(1)
.458***
(.075)
Workplacesize (In)
(2)
.448***
(.085)
-.065
(.085)
Economic sector
Manufacturing
-.417
(.290)
Service
-.331
(.374)
Education
-.277
(.358)
Government
-.515
(.434)
Other
-.656
(.569)
Gender(male)
.606***
(.182)
Seniority
.016
(.008)
Cadre rank
.501
(.282)
Married
-.058
(.683)
Log-likelihood
%2
Degrees of freedom
Numberof cases
p<.OS
**p0<.1
-461.5
-447.0
37.9
66.8
1
11
993
993
***p<.
Note: The omittedcategoryfor economic sectoris "commerce."
not survivecontrolsfor workplacesize andeconomic sector. The incrementin R2 due to the
additionof the economic sectorvariablesis statistically significant at the .001 level, and the
magnitudesof the coefficientsfor the individual
sector variablessupportthe conclusions drawn
fromTable2.
Significancetests for differencesbetweenthe
sector coefficients (indicatedby alphabeticsuperscriptsin Table 3) show that,controllingfor
budgetaryrankand workplacesize, workplaces
in manufacturingandgovernmentoffer measurablymorebenefitsthanworkplacesin theeducation sector, and that these workplaces,in turn,
offermorebenefitsthanorganizationsin the ser-
535
vice sector, which in turn offer more benefits
thanthose in commerceand"other"sectors.
Finally,the probabilitythata respondentlives
in housing provided by the work organization
was analyzedin two logit regressionequations
(Table 4). The housing variablemeasuresindividualconsumptionof one benefit- the costliest benefitandthe one most valuableto employees. The resultscontradictthose in Tables2 and
3 in intriguingways. After controllingfor the
moreimportantindividualcharacteristics
thought
to affect the distributionof workplacehousing
- seniority,gender,maritalstatusandcadre(official) rank- the only organization-levelvariable thathas an effect is budgetaryrank.In fact,
thebivariatecoefficientforbudgetaryrank(.458)
is not appreciablyreducedeven afterotherorganizationaland individualvariablesare addedto
theequation(.448). Genderis theonly othervariable in equation2 that is significant.Examination of all bivariaterelationshipsbetweenworkplace housing and the independentvariables
showedthatonly gender,cadrerank,andseniority had significantand positive relationships,in
all cases markedlysmallerthanthe bivariaterelationshipfor budgetaryrank.14
These results suggest that the availabilityof
benefitsto individualsmay not be determinedin
the sameway as the simpleexistenceof a benefit
or facility in an organization.The 11 benefits
analyzedearlierareused for briefperiodsby individualemployees, and the use of these facilities or benefitsby an individualdoes not, except
in the short term, diminishthe opportunityfor
othersto use thesebenefits.Oncean apartmentis
assigned,however,it is usedonly by theemployee's family, usually for a prolonged period.
Hence, the fiscal hierarchyof the state may be
more importantthanthe earlieranalysisindicated, especially where exclusive benefits to individualsin the workplaceareconcerned.
SUMMARY
Two differentprocessesaffectgovernmentfiscal
practices.The first is the incentiveof a government jurisdiction to extract revenue from the
workplacesunderits control.I hypothesizedthat
14Equations
werealsoestimated
formen
separately
andwomento see if theprocessesof allocationdifferedby sex, whichcouldaccountfor the different
resultsfromTables2 and3. Theseparateequations
for menandwomenshowedvirtuallythe sameresults.
536
governmentjurisdictionswith largebudgetsand
manyworkorganizations
haveproportionally
less
incentive and a diminishedcapacityto monitor
andprocurethe slackresourcesof theirworkorganizations.This propositionwas partiallysupportedby an examinationof the provisionof 11
benefits.Fortheprovisionof housingto employees, however, budgetaryrankwas the only significantorganization-levelvariable.
The secondprocess affectinggovernmentfiscal practiceis resourcedependence.I hypothesized that for enterprises,the largerthe workplace size, the greaterthe dependenceof a governmentjurisdictionon the work organization
for revenues,and thatthe manufacturingsector,
which providesthe vast majorityof government
tax revenue,would be an importantindicatorof
resourcedependence.Controllingfor all other
organizationalvariables, workplace size was
stronglyandconsistentlyassociatedwiththeprovisionof benefitsby workplaces,andworkplaces
in the manufacturingand government sectors
providedrelativelymorebenefitsthandid workplaces in the other sectors. These effects, however, did not hold for the probabilitythatan employee residesin workplacehousing,even after
controllingfor severalindividualcharacteristics.
The hypothesized causal mechanism is that
workplacesderivepowerfromthe government's
dependenceon them for revenue and products
needed elsewhere in the jurisdiction.The data
suggest that government jurisdictions permit
greaterslackresourcesamongorganizationsthey
are most dependenton. The finding that workplaces in governmentare just as privileged as
those in manufacturingin the provisionof benefits, however, suggests thatmechanismsspecified by elite theoristsalso operateat the organization level and coexist with resource dependence effects.
These resultsarepromising,but betterindicatorsof the hypothesizedmechanismsareneeded.
Budgetaryrankand workplacesize are, at best,
indirectmeasuresof the budgetaryandresource
dependenceprocesseshypothesizedto be atwork.
The differentresultsfor the provisionof 11 benefits versus the provisionof workplacehousing
highlightsthis concern.Withoutbetterdata,e.g.,
on output,governmentbudgets,work organizationfinances,orindividualusageof benefits,these
concernscannotbe addressed.Despite the limitationsof the presentdata,the analysissuggests
thatthe argumentsI have offeredaboutproperty
rightsand fiscal practicesmeritfurtherresearch
andconceptualelaboration.
AMERICANSOCIOLOGICALREVIEW
CONCLUSION
My analysisof stratification
in a centrallyplanned
economyemphasizes(1) thedistributionof property rightsamong governmentjurisdictions;(2)
the capacitiesand incentivesthatthese property
rights provide; and (3) the resultingfiscal and
budgetarypractices.Unlike the analogousphenomenonof "industryrents"in marketeconomies
stratificationin a plannedeconomy does not depend on advantagesthataccrueto some sectors
becauseof differencesin returnson capital.That
explanationholds only to the extentthatthe entity earningprofits has clear rights over income
flows. The redistributivepractices of planned
economies reflect the ownershiprights of governmentjurisdictions,andthereforeit is the level
of revenueextractionfrom a work organization
thatmustbe explained.
In futurework, a more sophisticatedview of
the interactionbetween governmentand industrymustbe developed,andthe conceptionof the
underlyingcausal mechanismsmust be sharpened. Workplacesize, for example, may represent resourcedependence,but it may also be a
measureof monitoringcosts:Largeorganizations
may be more difficult to monitorand therefore
arebetterableto concealresourcesfromofficials
anddivertthemto benefits.Similarly,budgetary
rank may representa reduced incentive to extract,but it may reflectmonitoringcosts as well:
Organizationslocatedin highlyindustrialized
jurisdictionsmay retainslackresourcesmoreeasily simplybecauseof the largenumberof organizationsto be monitored.This suggestsa "hoarding"model in line with earlierstudiesof Sovietstyle command economies (Berliner 1957;
Walder1987, 1989).
However,localgovernmentagenciesmayhave
an incentiveto allow the accumulationof slack
resources in certain enterprisesand may even
colludewithenterpriseofficials.Governmentjurisdictions with unfavorable revenue-sharing
agreementswithhigherlevels of governmentmay
preferresourcesto accumulatein enterprisesthat
couldthencontributetheseresourcesto local"extrabudgetaryrevenues"that are not subject to
revenue-sharing
agreements.Thissuggestsa "collusion"model.
The "hoarding"and "collusion"models are
differentviews of the incentivesfor government
to extractslack resourcesfrom work organizations. I have stresseda "fiscal structure"model
in which the incentivesfor governmentsto extract revenues decline as governmentbudgets
PROPERTYRIGHTSAND STRATIFICATIONUNDER SOCIALISM
grow. The "hoarding"model places greateremphasison themonitoringcapacityof government
and the costs of rigorousauditing:Largerenterprisesmay findit easierto conceal slackresources, and governmentjurisdictionswith many enterprisesmay find monitoringmoredifficultand
costly. The "collusion"model suggests a more
subtle view of government incentives, and is
foundedon the idea thata governmentjurisdictionmayalsowishto concealrevenuesfromhigher levels of government.All threeprocessesmay
operateto varying degrees; the challenge is to
measureandestimatetheirrelativeeffects.
There is anotherimportantinfluence process
thatmay be partlyresponsiblefor effects I have
attributedto resourcedependence.The leaders
of large and high-rankingorganizationstend to
have highercivil serviceranks,andprobablyenjoy more extensive and closer ties with government officials. An alternativeinterpretationof
the effects of workplacesize andbudgetaryrank
is thatthese reflectthe personalor politicalconnections of the leadersof these work organizations (Csanadi1989; Laky 1979). It is possible
thatpoliticalinfluencemay be partlyresponsible
fortheassociationswe haveattributed
to resource
dependence.A question for future researchis
whether such ties significantly affect revenue
extractionaftercontrollingfor the factorsexamined in this study.
Clearly,a numberof distinctcausalprocesses
may be at work in the context of the property
rights arrangementshighlighted in this paper.
Thus, the search for better data must proceed
togetherwith more refinedconceptualizationof
the interactionbetween governmentunits and
workorganizations.
In this study,I have only consideredthe question commonly conceived as "ability to pay,"
which is the equivalentof "capitalrents"in a
marketeconomy.Left unansweredis the equally
importantquestion of why managersof work
organizationschoose to supplybenefitsthatare
not dictatedby governmentregulationor paid
for by governmentfunds. This is especially importantin the manufacturingsector,which lacks
the kinds of labor markets,managerialincentives, and forms of collective organizationthat
are the stuff of theorizingaboutmarketeconomies. Is therea socialistequivalentto an "implicit contract"or an "efficiencywage"?This line of
inquiryleads back to incentives,power, and influence processes within organizations. Such
work has alreadybegun, largely throughinterviews andfield work(BurawoyandLukacs1985;
537
Sabel andStark1982; Stark1986, 1989;Walder
1987, 1989). The challenge is to fashion these
ideas in a way thatexplainsstatisticalpatternsin
the distributionof benefits, wages, and other
formsof compensationacrosssectorsandwithin
organizations.
I havesubjectedto explicitanalysistheassumption of much recent thinking about inequality
undersocialism- thatits economic institutions
are "redistributive."
Two common observations
aboutpropertyrightsin a plannedeconomywere
examined:thatpropertyrightsarepredominantly held by the state, and that the rightsof work
organizationsare poorly articulatedand weak.
Although"state"ownershippredominates,analytic leverageis gainedby emphasizingthatstate
propertyrights,especiallywithregardto income
flows, aredispersedacrossgovernmentjurisdictions. Although enterprisesdo not have clear
rightsto theirincome, which leads to a "regime
of bargaining,"I have specified some of the organizationalprocesses that may cause bargaining outcomesto vary.In short,I havetriedto bring
institutionalprocessesto the forefrontof a field
is often a background
in which "redistribution"
assumptionandelites or occupationalgroupsare
the actors endowed with interests and power.
Socialisteconomies are stratified,not solely because strategicelites influencethe outcomes of
redistribution.
They arealso stratifiedbecauseof
the allocationof propertyrightsthatdefines the
fiscal structureof the state.
ANDREWG. WALDERis Professorof Sociology at Har-
vard University.In addition to his ongoing work on
the economic and political institutionsof communist
states and their transformationin the currentera, he
is also conductingresearch on the political orientations and ideologies of varied mass movementsduring the ChineseCulturalRevolutionof 1966-1969.
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