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Allocation efficiency in China's state-owned, private, and foreign sector firms

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  • Hashiguchi, Yoshihiro

Abstract

Despite the fact many scholars have shown an interest in China's allocation efficiency, few studies have examined quantitative analysis of allocation efficiency within and between the state-owned and private sectors. To address this issue, this paper develops a quantitative measure of allocation efficiency, which is an extension of the dynamic Olley-Pakes productivity decomposition proposed by Melitz and Polanec (2015). The extended measure enables the simultaneous capture of the degree of misallocation within a group and between groups and parallel to capturing the contribution of entering and exiting firms to aggregate productivity growth. Using China's manufacturing firm-level data from 2003 to 2007, the author examine the efficiency of resource allocation within and between three ownership sectors (state-owned, domestic private, and foreign sectors). It is found that the between allocation efficiency tends to improve in industries wherein market shares move from the less-productive state sector to the more-productive private sector.

Suggested Citation

  • Hashiguchi, Yoshihiro, 2020. "Allocation efficiency in China's state-owned, private, and foreign sector firms," IDE Discussion Papers 778, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper778
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    More about this item

    Keywords

    Misallocation; Firm-level productivity; Structural estimation; China; Business enterprises;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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