Industrial and Aggregate Measures of Productivity Growth in China, 1982–2000

Abstract

We estimate productivity growth for 33 industries covering the entire Chinese economy using a time series of input-output tables covering 1982-2000. Capital input is measured using detailed investment data by asset and labor input uses demographic information from household surveys. We find a wide range of productivity performance at the industry level. We then show how these industry growth accounts may be consistently aggregated to deliver a decomposition of aggregate GDP growth. For the 1982-2000 period aggregate TFP growth was 2.5 percent per year; decelerating from a rapid rate in the early 1980s to negative growth during 1994-2000. The main source of growth during the 1982-2000 period was capital accumulation, with a small negative contribution from the reallocation of factors across industries. IntroductionWhile it is widely agreed that the Chinese economy has grown rapidly since the reforms started in 1978, there is disagreement about both the magnitude and sources of that growth. Was the dominant factor the accumulation of capital, total factor productivity growth, or the restructuring of the economy from agriculture to manufacturing and services? A question related to the structural transformation of the economy is how estimates of aggregate GDP growth may be reconciled with the estimates at the industry level. These questions are difficult to answer given the quality and quantity of data available. The answers to them, however, are important in understanding the effects of past economic policies and hence to devise future policies.Note: We thank two anonymous referees for helpful comments. We also thank members of the National Accounts Department, NBS, who helped us with the data: Xu Xianchun, Qi Shuchang, Liu Liping, Dong Lihua and Zhao Tonglu. We are also grateful for the assistance of Li Xiaoqin and Ma Xiangqian from Beihang University. *Correspondence to: Jing Cao, School of Economics and Management, Tsinghua University, 100084, Beijing, P.R. China (caojing@sem.tsinghua.edu.cn). 485This paper estimates the sources of growth of industry output-the growth of capital, labor and intermediate inputs, and total factor productivity (TFP). To do this we introduce newly developed data, including a time series of input-output tables and estimates from a survey of the labor force. Our measures account for the changing composition of the labor force and investment. The second aim of the paper is to discuss how these industry measures may be aggregated to GDP. We describe three aggregation approaches to highlight the methodological issues of separating out the roles of factor accumulation, factor reallocation and sectoral total factor productivity growth: (i) aggregate production function; (ii) aggregate production possibility frontier (PPF); and (iii) direct Domar-weighted aggregation. The first approach may be familiar to many readers; the aggregate PPF method relaxes the strict assumptions of that approach and allows us to identify the effects of reallocating value-added across industries. The third method...

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