An Empirical Analysis of Provincial Productivity in China (1979-2001)

This study estimates and analyzes provincial productivity growth in China for the period 1979-2001. The Malmquist Index approach allows us to decompose productivity growth into two components, technological progress and efficiency change. Considerable productivity growth was found for most of the data period, but it was accomplished mainly through technological progress rather than efficiency improvement. Although China's capital stock has accumulated at record speed in recent years, our findings show that TFP growth slowed down significantly during 1995-2001. The study thus raises serious questions about whether China's recent growth pattern is consistent with its comparative advantages, and whether its reliance on capital accumulation can be sustained in the long run.