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What Is the Focus of Structural Reform in China?—Comparison of the Factor Misallocation Degree within the Manufacturing Industry with a Unified Model

Laiqun Jin (), Changwei Mo (), Bochao Zhang () and Bing Yu ()
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Laiqun Jin: School of Business, Ningbo University, Ningbo 315211, China
Changwei Mo: School of Economics, Xiamen University, Xiamen 361005, China
Bochao Zhang: Institute of Economics, Shanghai Academy of Social Sciences, Shanghai 200235, China
Bing Yu: School of Business, Ningbo University, Ningbo 315211, China

Sustainability, 2018, vol. 10, issue 11, 1-19

Abstract: The misallocation of production factors, with structural misallocation as an important aspect, is a key instigator of low total factor productivity (TFP) growth rate in China, but one important question is which structural misallocation of what factor is more serious in China. Using China’s manufacturing industrial enterprise data from 1998 to 2013, we calculated and compared the factors misallocation degree among industries, ownerships and regions. The results indicated that, the misallocation among industries was most serious, which led to a TFP loss of 8.12% annually. The misallocation among ownerships ranked second, which led to a TFP loss of 5.49%. The least degree of the misallocation recorded among provinces led to TFP loss of 3.05%. By using the relative severity index, the rank is the same. As to the capital, the misallocation among ownerships was most serious, which led to TFP loss of 4.62%. But as to the labor, the misallocation among industries was most serious, which led to TFP loss of 4.58%. Moreover, the misallocation among ownerships alleviated rapidly from 1998 to 2007, while alleviated slower among industries and regions. However, from 2008 to 2013, all three types of structural misallocation have become worse, especially in labor. These conclusions are important to identify the focus of structural reform in China.

Keywords: structural misallocation; factor allocation efficiency; total factor productivity (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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