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Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing

Loren Brandt (), Johannes Van Biesebroeck () and Yifan Zhang ()

No 15152, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present the first comprehensive set of firm-level total factor productivity estimates for China's manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period 1998-2006. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.

JEL-codes: D24 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-eff and nep-ent
Date: 2009-07
Note: PR
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Published as Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.

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