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The Contribution of Restructuring and Reallocation to China's Productivity and Growth

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Author Info

  • Haiyan Deng

    (The Conference Board)

  • Robert H. McGuckin

    (The Conference Board)

  • John C. Haltiwanger

    ()
    (University of Maryland)

  • Xu Jianyi

    (NBS)

  • Liu Yaodong

    (NBS)

  • Liu Yuqi

    (NBS)

Abstract

China has exhibited very rapid measured aggregate productivity growth. At the same time, the structure of its markets and the structure of businesses have been changing at an equally rapid rate. In this paper, we measure the extent of restructuring and the reallocation of resources (including the reallocation of jobs) and then quantify the contribution of the reallocation and restructuring to the aggregate productivity growth of China's industrial structure. Our gross job flow analysis illustrates that reallocation and restructuring took many forms including shedding of jobs by government controlled enterprises and the increasing share of employment for FDI joint ventures. However, the analysis shows that it is not just shifts between firm types that are important but also reallocation and restructuring within firm types. For example, we find a high pace of job reallocation within SOEs and FDI joint ventures over and above what is needed to accommodate the net changes for these firm types (as high as 28 and 22 percent, respectively). We find evidence that the restructuring and reallocation contributed significantly to the high productivity growth. For example, our analysis shows that more than half of the labor productivity growth in 2001 is due to reallocation and restructuring. In that year, the industrial sector exhibited a labor productivity growth rate of around 22 percent which in the absence of reallocation and restructuring would have been around 10 percent.

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File URL: http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0024-07-WP
File Function: First version, 2007
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Bibliographic Info

Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 07-04.

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Length: 67 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:cnf:wpaper:0704

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Cited by:
  1. DennisTao Yang & VivianWeijia Chen & Ryan Monarch, 2010. "Rising Wages: Has China Lost Its Global Labor Advantage?," Pacific Economic Review, Wiley Blackwell, vol. 15(4), pages 482-504, October.

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