Labour reallocation and total factor productivity growth in China

You, Kefei and Sarantis, Nicholas (2010) Labour reallocation and total factor productivity growth in China. Centre for International Capital Markets discussion papers, 2010 (04). pp. 1-38. ISSN 1749-3412


This paper carries out an empirical investigation of the contribution of labour reallocation, which can produce efficiency gains over and above those associated with technical progress, to total factor productivity in China during the pre-reform and post-reform periods. We consider two forms of labour reallocation, rural and ownership transformation, and exam their contribution within the frameworks of VES, CES and Cobb Douglas production functions. The empirical evidence rejects VES and CES and supports the Cobb Douglas production function. We find that rural transformation has made a highly significant contribution to total factor productivity and output growth in China irrespective of the production function and capital series employed. In contrast, ownership transformation has not had a significant impact on output and total factor productivity.

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