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Barriers to Entry and Regional Economic Growth in China

Loren Brandt (), Gueorgui Kambourov and Kjetil Storesletten ()

Working Papers from University of Toronto, Department of Economics

Abstract: The non-state manufacturing sector has been the engine of China's economic transformation. Up through the mid-1990s, the sector exhibited large regional differences; between 1995 and 2004 we observe rapid convergence in terms of productivity, wages, and new firm start-up rates. To analyze the drivers of this behavior, we construct a Hopenhayn (1992) model that incorporates location-specific capital wedges, output wedges, and a novel entry barrier. Using Chinese Industry Census data we estimate these wedges and examine their role in explaining differences in performance across prefectures and over time. Entry barriers turn out to be the salient factor explaining performance differences. We investigate the empirical covariates of these entry barriers and find that barriers are causally related to the size of the state sector. Thus, the downsizing of the state sector after 1997 may be important in explaining the regional convergence and manufacturing growth after 1995.

Keywords: Chinese economic growth; SOEs; fi rm entry; entry barriers; capital wedges; output wedges; SOE reform (search for similar items in EconPapers)
JEL-codes: D22 D24 E24 O11 O14 O16 O40 O53 P25 R13 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2018-11-07
New Economics Papers: this item is included in nep-bec, nep-cna, nep-eff, nep-ent, nep-mac, nep-sbm, nep-tid, nep-tra and nep-ure
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Related works:
Working Paper: Barriers to Entry and Regional Economic Growth in China (2020) Downloads
Working Paper: Barriers to Entry and Regional Economic Growth in China (2020) Downloads
Working Paper: Barriers to Entry and Regional Economic Growth in China (2018) Downloads
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