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What Drives the Volatility of Firm Level Productivity in China?

Author

Listed:
  • Xubei Luo

    (The World Bank, USA)

  • Nong Zhu

    (INRS-UCS, University of Quebec, Canada)

Abstract

The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. Using a firm-level dataset collected annually during the period of 1998–2007, this paper examines the variation of productivity volatility across firms of different characteristics as well as its evolution over time, and investigates the sources of productivity volatility at the firm level. The results suggest that in general, productivity volatility at the firm level declined over time in China. Large firms, old firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility – one in a positive way and one in a negative way. While the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased.

Suggested Citation

  • Xubei Luo & Nong Zhu, 2016. "What Drives the Volatility of Firm Level Productivity in China?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(5), pages 64-80, June.
    • Handle: RePEc:sgm:jbfeuw:v:1:y:2016:i:5:p:64-80
    DOI: 10.7172/2353-6845.jbfe.2016.1.3
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    References listed on IDEAS

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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