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Towards an Institutional Interpretation of TFP Changes in China

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  • Wu, Harry X.

Abstract

This research note reiterates the productivity theory in the Solow growth accounting framework to explore an institutional interpretation of changes in total factor productivity. In theory, total factor productivity or TFP growth is a costless gain in output, which captures the effect of positive externalities caused by spillovers of technological and organizational changes in a perfect market system. This provides a yardstick to gauge institutional effect on output in an imperfect market system if all inputs are properly measured. Using the Chinese case, I show that an integrated approach a la Jorgenson and Griliches (1967) that ensures a consistency between theory, methodology and measurement can facilitate empirical exercises even with data problems, and a so-constructed TFP index for China can satisfactorily reproduce China's post-reform productivity path with institutional interpretations.

Suggested Citation

  • Wu, Harry X., 2019. "Towards an Institutional Interpretation of TFP Changes in China," CEI Working Paper Series 2019-4, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2019-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Total factor productivity (TFP) growth; Factor reallocation effect on TFP growth; Institution; Economic reform;
    All these keywords.

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P30 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - General

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