Investment dynamics and capital distortion: State and non-state firms in China

Le Tang

Journal of Asian Economics, 2021, vol. 73, issue C

Abstract: This paper studies investment dynamics in Chinese manufacturing firms. The analysis estimates capital adjustment costs and uncovers capital distortion in state and non-state firms. There is strong evidence of quadratic adjustment cost and distortion in capital price for both types of firms. The capital distortion is a major source of capital misallocation in Chinese firms. Completely removing the distortion would increase aggregate total factor productivity (TFP) by 18–29%.

Keywords: Capital adjustment cost; Capital distortion; Aggregate TFP; China (search for similar items in EconPapers)
JEL-codes: E22 O11 P31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:73:y:2021:i:c:s1049007821000038

DOI: 10.1016/j.asieco.2021.101274

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