Allocation of resources within subgroups of an industry: a case study in the Chinese industrial sector

Chun-kei Tsang () and Sung-ko Li
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Chun-kei Tsang: Hong Kong Baptist University
Sung-ko Li: Hong Kong Baptist University

Journal of Productivity Analysis, 2020, vol. 53, issue 1, No 10, 125-139

Abstract: Abstract Facing bottlenecks of economic growth, two important policy concerns of the Chinese government are the regional fragmentation and ownership distortion. This paper extends the method of measuring structural efficiency of a group of firms to the existence of subgroups of firms to evaluate such issue. Without knowing the “true” prices, we argue that there is an output-oriented solution to the economy. We then apply this new method to the Chinese industrial sector from 2005 to 2014 as a case study. We found that resources were allocated efficiently among different regions but not within regions. In contrast, resources were allocated efficiently within different ownerships but not among ownerships. Specifically, by eliminating inefficient resource allocation among different ownerships, outputs of the whole industrial sector could be increased by 21% of the observed levels. These two findings cannot be derived directly from other existing methods. Our results advocate different directions to conduct further regional and ownership reforms in China.

Keywords: Chinese industrial sector; Revenue structural efficiency; Output-oriented structural efficiency; Western development strategy; Ownership reform (search for similar items in EconPapers)
JEL-codes: C11 L60 P21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11123-019-00563-8

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