DOES FREE EXIT REDUCE SHIRKING IN PRODUCTION TEAMS

Justin Lin argues that the stagnation of agricultural productivity in China during 1959-1978 was brought about by the elimination of exit rights in collective farms. By eliminating exit rights, the state transformed agricultural production into a one-shot game where effort agreements could not be self-enforced. We show that this conclusion is unwarranted on both theoretical and empirical grounds. Theoretically, efficient effort levels are more easily maintained when exit is restricted. Empirically, the productivity losses incurred under collectivization are more plausibly attributed to other policy errors by the state. J. Comp. Econom., June 1993, 17(2), pp. 472-484. Saint Mary’s University, Halifax, Nova Scotia, Canada B3H 3C3; University of Alberta, Edmonton, Alberta, Canada T6G 2H4. © 1993 by Academic Press, Inc.