An Empirical Analysis of Provincial Productivity in China (1979-2001)

Abstract

This study estimates and analyzes provincial productivity growth in China for the period of 1979-2001. The Malmquist Index approach used in the study allows us to decompose productivity growth into two mutually exclusive and exhaustive components, technical progress and efficiency change. Considerable productivity growth was found for most of the data period, but it was accomplished mainly through technical progress rather than through efficiency improvement. In comparison with the period of 1979-1995, although China’s capital stock has been accumulated at the speed of a historical record in recent years, our findings show that TFP growth has slowed significantly during 1995-2001. The study thus raises a number of serious questions on whether China’s recent growth pattern is consistent with its comparative advantages, and whether its reliance on capital accumulation can be sustained in the long run.