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This paper examines the productivity effect of two categories of core infrastructure investment in China, by matching a panel of manufacturing firm‐level production data with province‐level infrastructure investment data. Cross‐industry variation in infrastructure reliance using input–output table information is employed to address potential endogeneity issues. We find that firms in an industry that relies more heavily on infrastructure in production experience higher productivity growth from more infrastructure investment. On average, the annual rate of return to core infrastructure investment in China is about 23% during 1998–2007.

China has experienced high-speed catch-up growth with an average annual rate of over 8% in per capita GDP in the past four decades. Using growth accounting, Zhu (Understanding China’s growth: Past, present, and future. Journal of Economics Perspectives, 26(4), 103–124) finds that the growth of total factor productivity (TFP) accounts for 77% of China’s per capita GDP growth during 1978–2007, and argues that China’s TFP growth is mainly driven by resource reallocation due to market liberalization and institutional reforms. This paper aims to estimate China’s aggregate productivity growth by applying three leading methods of estimating firm-level production function on Chinese manufacturing firms during 1998–2007, and quantify the contribution of resource reallocation to productivity growth. In addition, we also empirically compare the three estimation methods in this large data set.

In this paper, we examine how the minimum wage affects firm productivity growth with a representative Chinese manufacturing data. Instrumental variable estimation is employed to deal with the potential endogeneity problem between minimum wage and productivity growth. We find that with a 1% increase in the minimum wage, the productivity growth rate on average decreases by 0.299%. Overall, we find that variations in the minimum wage have a highly heterogeneous effect on productivity growth across regions, time and ownerships. To deal with the continuous increase in the minimum wage, firms will use more capital and intermediate input to replace labor.