How Efficient Has Been China's Investment? Empirical Evidence from National and Provincial Data

21 Pages Posted: 5 Nov 2007

See all articles by Dong He

Dong He

Hong Kong Monetary Authority; Hong Kong Institute for Monetary Research (HKIMR)

Wenlang Zhang

Independent

Jimmy Shek

Bank for International Settlements (BIS)

Abstract

This paper analyzes both the allocative efficiency and the dynamic efficiency of China's pending on capital. We examine the relationship between investment flows and the marginal product of capital computed by estimating the Cobb-Douglas and CES production functions at both the national and provincial levels. We also investigate dynamic efficiency by comparing the share of capital in national income and the rate of investment. The main finding is that the allocative efficiency of capital in China has improved in recent years, but the high rate of investment may be a sign of dynamic inefficiency of the Chinese economy.

Suggested Citation

He, Dong and Zhang, Wenlang and Shek, Jimmy, How Efficient Has Been China's Investment? Empirical Evidence from National and Provincial Data. Pacific Economic Review, Vol. 12, Issue 5, pp. 597-617, December 2007. Available at SSRN: https://ssrn.com/abstract=1027091 or http://dx.doi.org/10.1111/j.1468-0106.2007.00374.x

Dong He (Contact Author)

Hong Kong Monetary Authority

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

Hong Kong Institute for Monetary Research (HKIMR)

3 Garden Road, 8th Floor
Hong Kong
China

Wenlang Zhang

Independent ( email )

No Address Available

Jimmy Shek

Bank for International Settlements (BIS) ( email )

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