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Driving total factor productivity: Capital and labor with tax allocation

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  • Xu, Bing
  • Sendra-García, Javier
  • Gao, Yanxia
  • Chen, Xiaohui

Abstract

In small and micro enterprises, the capital and labor input change frequently with time, which is difficult to observe directly. Therefore, it is a challenging problem to measure total factor productivity, the source of sustainable economic growth. This paper establishes a new time-varying production function model to measure the Total Factor Productivity for small and micro enterprises, as well as its corresponding technological progress and efficiency improvement. Based on the data of 7158 small and micro enterprises in Yuhuan China Auto Parts City. The results of this paper find that Total factor productivity is mainly attributed to technological progress, which is mainly driven by labor force. Efficiency improvement is also changing in the same direction as labor-driven efficiency improvement Human resource management may be the main reason for low efficiency. As a policy implication of our results, this paper designs a policy allocation using delaying tax payment and proper tax policy allocation. The economic and social benefits of enterprises can be balanced and total factor productivity can be promoted.

Suggested Citation

  • Xu, Bing & Sendra-García, Javier & Gao, Yanxia & Chen, Xiaohui, 2020. "Driving total factor productivity: Capital and labor with tax allocation," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:tefoso:v:150:y:2020:i:c:s004016251931073x
    DOI: 10.1016/j.techfore.2019.119782
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    References listed on IDEAS

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    3. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    4. Chiara Criscuolo & Ralf Martin & Henry G. Overman & John Van Reenen, 2019. "Some Causal Effects of an Industrial Policy," American Economic Review, American Economic Association, vol. 109(1), pages 48-85, January.
    5. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
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    Cited by:

    1. Wu, Qingyang & Wang, Yanying, 2022. "How does carbon emission price stimulate enterprises' total factor productivity? Insights from China's emission trading scheme pilots," Energy Economics, Elsevier, vol. 109(C).
    2. Rongwu Zhang & Lan Luo & Jianjun Du, 2023. "The influence of fiscal policy uncertainty on corporate total factor productivity: Evidence from Chinese public companies," Contemporary Economic Policy, Western Economic Association International, vol. 41(3), pages 532-554, July.
    3. Musa Abdu & Adamu Jibir & Salihu Abdullahi & Aisha Adamu Hassan, 2021. "Drivers of manufacturing firms’ productivity: a micro-perspective to industrialization in Nigeria," SN Business & Economics, Springer, vol. 1(2), pages 1-17, February.

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