Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing

Loren BRANDT, Johannes VAN BIESEBROECK, Yifan ZHANG

Research output: Journal PublicationsJournal Article (refereed)peer-review

517 Citations (Scopus)

Abstract

We present the first comprehensive set of firm-level total factor productivity (TFP) estimates for China's manufacturing sector that spans China's entry into the WTO. For our preferred estimate, which adjusts for a number of potential sources of measurement error and bias, the weighted average annual productivity growth for incumbents is 2.85% for a gross output production function and 7.96% for a value added production function over the period 1998–2007. This is among the highest compared to other countries. Productivity growth at the industry level is even higher, reflecting the dynamic force of creative destruction. Over the entire period, net entry accounts for over two thirds of total TFP growth. In contrast to earlier studies looking at total non-agriculture including services, we find that TFP growth dominates input accumulation as a source of output growth.
Original languageEnglish
Pages (from-to)339-351
Number of pages13
JournalJournal of Development Economics
Volume97
Issue number2
DOIs
Publication statusPublished - 1 Mar 2012

Bibliographical note

We wish to thank three anonymous referees and the editor for excellent comments that have greatly improved the paper. Funding by Canada's SSHRC and the EU's ERC is gratefully acknowledged.

Keywords

  • China
  • Entry
  • Exit
  • Industrial development
  • Reallocation
  • TFP

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