The impact of financing constraints on total factors productivity: evidence from property law reform in China

Hongguang Sui, Tairan Guo, Lingyan Sun and Md Shariful Islam

Applied Economics, 2024, vol. 56, issue 56, 7409-7421

Abstract: This paper examines the effect of financing constraints on total factor productivity (TFP) using China’s Property Law reform as a natural experiment, employing a difference-in-difference (DID) model. The study reveals that easing financing constraints significantly enhances TFP. These results hold through parallel trend tests, placebo time checks, treatment group randomization, and regression using an alternate TFP measurement. Quantitatively, alleviating the financing constraint by one standard deviation can boost TFP by 26.5% of its standard deviation. It is noted that state-owned enterprises are more responsive to property rights protection than private and foreign enterprises.

Date: 2024
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DOI: 10.1080/00036846.2023.2283775

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