Total Factor Productivity in China's Manufacturing Sector in the Aftermath of the Global Financial Crisis

Guangjun Shen and Jingxian Zou

China & World Economy, 2023, vol. 31, issue 2, 1-25

Abstract: This paper improves the estimation of firm‐level total factor productivity (TFP) by considering energy use and including small‐ and medium‐sized enterprises using data from the Chinese National Tax Survey Database (2008–2011). It analyzes the production efficiency of Chinese manufacturing firms using the improved TFP data and finds that (i) the TFP data frequently used in previous studies overestimated firms' real production efficiency; (ii) the TFP of manufacturing firms decreased from 2008 to 2011 due to declines in both technical efficiency and allocation efficiency; (iii) the lower capacity utilization of production factors led to lower technical efficiency; and (iv) allocation efficiency decreased more in provinces and industries with higher shares of state‐owned enterprises. The findings have policy implications for enhancing growth potential in the long run.

Date: 2023
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