Working Paper: NBER ID: w15152
Authors: Loren Brandt; Johannes Van Biesebroeck; Yifan Zhang
Abstract: We present the first comprehensive set of firm-level total factor productivity estimates for China's manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period 1998-2006. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.
Keywords: productivity; Chinese manufacturing; total factor productivity
JEL Codes: D24; O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm-level productivity (D22) | overall economic performance (P47) |
| labor quality and labor hours (J24) | productivity estimates (E23) |
| new entrants (M13) | productivity growth (O49) |
| entry and exit dynamics (C69) | overall productivity growth (O49) |
| input reallocation towards higher productivity firms (D22) | aggregate productivity growth (O49) |