Sources of investment inefficiency: The case of fixed-asset investment in China
AbstractThis study attempts to measure the inefficiency associated with aggregate investment in a transitional economy. The inefficiency is decomposed into allocative and technical inefficiency based on standard production theory. Allocative inefficiency is measured by the deviation of actual investment from the theoretically desired investment demand. Institutional factors are then identified as part of the driving force of the deviation. The resulting model is applied to Chinese provincial panel data. The main findings are: Chinese investment demand is strongly receptive to expansionary fiscal policies and inter-provincial network effects; the tendency of over-investment remains, even with signs of increasing allocative efficiency and improving technical efficiency.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 90 (2009)
Issue (Month): 1 (September)
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Over-investment Efficiency Soft-budget constraint;
Other versions of this item:
- Duo Qin & Haiyan Song, 2007. "Sources of Investment Inefficiency: The Case of Fixed-Asset Investment in China," Working Papers 584, Queen Mary, University of London, School of Economics and Finance.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
- P3 - Economic Systems - - Socialist Institutions and Their Transitions
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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