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You, Kefei and Sarantis, Nicholas (2010) Structural breaks, rural transformation and total factor productivity growth in China (discussion paper). Centre for International Capital Markets discussion papers, 2010 (06). pp. 1-29. ISSN 1749-3412
This paper carries out an empirical investigation of the contribution of rural transformation, which can produce efficiency gains over and above those associated with technical progress, to total factor productivity in China during 1970-2008. For the first time for China, the roles of rural transformation and technical progress are examined whilst structural breaks are taken into account. We employ Bai and Perron (1998, 2003a, b) methods which allow for multiple structural breaks at unknown dates and can be applied for both pure and partial structural changes. We also evaluate the robustness of our results by employing alternative production functions and two capital series. A structural break near the end of the pre-reform period is identified for both capital series and another one near the Tiananmen Square incident in 1989 for the extended Chow and Li (2002) capital series. We found the contribution of rural transformation to total factor productivity to be significant and positive across all regimes. In contrast, the effect of technical progress was negative in the pre-reform period but positive in the post-reform period.
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