Decomposing the contribution of firm innovation to aggregate productivity growth: the case of Chinese manufacturing industry

Xiaoyong Dai, Zao Sun and Hang Liu

Applied Economics Letters, 2019, vol. 26, issue 7, 543-548

Abstract: This article proposes a generalized productivity decomposition approach to evaluate the contribution of firm innovation to aggregate productivity growth (APG) of China’s manufacturing industry. Results indicate that APG is mainly driven by firm-level productivity improvements, while across-firm resource misallocations lead to sizable productivity losses. The weak contribution of firm innovation to APG is found to be mainly caused by resource misallocations within innovating firms. The results suggest that firm innovation has not yet taken a dominant driving force for APG.

Date: 2019
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DOI: 10.1080/13504851.2018.1488038

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