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

50 Pages Posted: 21 Jul 2009 Last revised: 10 Aug 2009

See all articles by Loren Brandt

Loren Brandt

University of Toronto - Department of Economics; IZA Institute of Labor Economics

Johannes Van Biesebroeck

K.U.Leuven; Centre for Economic Policy Research (CEPR)

Yifan Zhang

Sun Yat-Sen University (SYSU) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 2009

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.

Suggested Citation

Brandt, Loren and Van Biesebroeck, Johannes and Zhang, Yifan, Creative Accounting or Creative Destruction? Firm-Level Productivity Growth in Chinese Manufacturing (July 2009). NBER Working Paper No. w15152. Available at SSRN: https://ssrn.com/abstract=1434667

Loren Brandt

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4442 (Phone)
416-978-6713 (Fax)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Johannes Van Biesebroeck (Contact Author)

K.U.Leuven ( email )

Naamsestraat 69
B-3000 Leuven
Belgium
+3216326793 (Phone)
+3216326796 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/public/N07057/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Yifan Zhang

Sun Yat-Sen University (SYSU) - Department of Economics ( email )

8 Castle Peak Road
Tuen Mun, NT
Hong Kong

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