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Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing

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Author Info
Loren Brandt
Johannes Van Biesebroeck
Yifan Zhang

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Abstract

We present the first comprehensive set of firm-level total factor productivity estimates for China’s manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period 1998-2006. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15152.

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Date of creation: Jul 2009
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Handle: RePEc:nbr:nberwo:15152

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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This page was last updated on 2009-11-25.

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