State advances and private retreats? — Evidence of aggregate productivity decomposition in China

Jun Du (), Xiaoxuan Liu and Ying Zhou

China Economic Review, 2014, vol. 31, issue C, 459-474

Abstract: This paper is motivated by the recent debate on the existence and scale of China's ‘Guo Jin Min Tui’ phenomenon, which is often translated as ‘the state sector advances and the private sector retreats’. We argue that the profound implication of an advancing state sector is not the size expansion of the state ownership in the economy per se, but the likely retardation of the development of the already financially constrained private sector and the issues around the sustainability of the already weakening Chinese economy growth. Drawing on recent methodological advances, we provide a critical analysis of the contributions of the state and non-state sectors in the aggregate Total Factor Productivity and its growth over the period of 1998–2007 to verify the existence of GJMT and its possible impacts on Chinese economic growth. Overall, we find strong and consistent evidence of a systematic and worsening resource misallocation within the state sector and/or between the state sectors and private sectors over time. This suggests that non-market forces allow resources to be driven away from their competitive market allocation and towards the inefficient state sector.

Keywords: Industrial development; Reallocation; Decomposition; Aggregate productivity; China (search for similar items in EconPapers)
JEL-codes: C10 D24 O14 O47 P3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:31:y:2014:i:c:p:459-474

DOI: 10.1016/j.chieco.2014.03.002

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