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De-Monopolization toward Long-Term Prosperity in China

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  • Ashvin Ahuja
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    Abstract

    During the past decade, the average Chinese earns roughly 9 times less and is 10 times less productive than the average American at purchasing power parity. Current consensus attributes large differences in output per worker to differences in total factor productivity (TFP). Evidence suggests that most of the US-China TFP differences lie in the inefficiency of China''s domestic-oriented service and agricultural sectors. This paper focuses on (1) the evidence of monopoly rights and its influence on work practice improvement at China''s firms and plants and (2) the evidence that policy arrangement there has encouraged more competition in merchandise manufacturing and heavy industries while barriers to market access remain high against new firms in the domestic market (especially in services). A numerical experiment is provided, which suggests that China can enhance long-term income per capita by a factor of 10 largely through TFP gains by implementing reform to weaken protection of monopolies and encourage entry in all industries.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/75.

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    Length: 29
    Date of creation: 01 Mar 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/75

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    Related research

    Keywords: Economic models; Manufacturing sector; Markets; Services sector; monopoly; competition; gdp per capita; competitive equilibrium; total factor productivity; economic growth; competitive pressure; real gdp; state ? monopoly; global competition; per capita income; market competition; barrier to entry; regulatory environment; protection from competition; price competition; monopolistic competition;

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    1. Barry Bosworth & Susan M. Collins, 2007. "Accounting for Growth: Comparing China and India," NBER Working Papers 12943, National Bureau of Economic Research, Inc.
    2. Hendricks, Lutz A., 2002. "How Important is Human Capital for Development? Evidence from Immigrant Earnings," Staff General Research Papers, Iowa State University, Department of Economics 11409, Iowa State University, Department of Economics.
    3. Guillermina Jasso & Mark Rosensweig & James P. Smith, 2003. "The Earnings of US immigrants," Labor and Demography, EconWPA 0312007, EconWPA.
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