Allocation efficiency in China's state-owned, private, and foreign sector firms

Yoshihiro Hashiguchi

No 778, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Despite the fact many scholars have shown an interest in China's allocation efficiency, few studies have examined quantitative analysis of allocation efficiency within and between the state-owned and private sectors. To address this issue, 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. Using China's manufacturing firm-level data from 2003 to 2007, the author examine the efficiency of resource allocation within and between three ownership sectors (state-owned, domestic private, and foreign sectors). It is found that the between allocation efficiency tends to improve in industries wherein market shares move from the less-productive state sector to the more-productive private sector.

Keywords: Misallocation; Firm-level productivity; Structural estimation; China; Business enterprises (search for similar items in EconPapers)
JEL-codes: D24 O47 (search for similar items in EconPapers)
Date: 2020-03
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 778. 2020-03

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