Allocation efficiency in China: an extension of the dynamic Olley-Pakes productivity decomposition

Yoshihiro Hashiguchi

No 544, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This paper develops a quantitative measure of allocation efficiency, which is an extension of the dynamic Olley-Pakes productivity decomposition proposed by Melitz and Polanec (2015). The extended measure enables the simultaneous capture of the degree of misallocation within a group and between groups and parallel to capturing the contribution of entering and exiting firms to aggregate productivity growth. This measure empirically assesses the degree of misallocation in China using manufacturing firm-level data from 2004 to 2007. Misallocation among industrial sectors has been found to increase over time, and allocation efficiency within an industry has been found to worsen in industries that use more capital and have firms with relatively higher state-owned market shares. Allocation efficiency among three ownership sectors (state-owned, domestic private, and foreign sectors) tends to improve in industries wherein the market share moves from a less-productive state-owned sector to a more productive private sector.

Keywords: China; Productivity; Business enterprises; Economic growth; Macroeconomics; Misallocation; Firm-level productivity; Structural estimation (search for similar items in EconPapers)
JEL-codes: D24 O47 (search for similar items in EconPapers)
Date: 2015-11-01
New Economics Papers: this item is included in nep-bec, nep-cna, nep-eff and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 544. 2015-11-01

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