Rural transformation and productivity in China

You, Kefei and Sarantis, Nicholas (2008) Rural transformation and productivity in China. Centre for International Capital Markets discussion papers, 2008 (06). pp. 1-29. ISSN 1749-3412


This paper carries out for the first time an econometric investigation of the contribution of rural transformation to total factor productivity in China. We find that the efficiency gains resulting from rural transformation make a significant and nontrivial contribution to factor productivity in China. During the pre-reform period (1952-1977), the average growth rate of net factor productivity, which results from technical progress, was close to zero. But when rural transformation is introduced, average total factor productivity growth becomes positive. During the post-reform period (1978-2005), both total and net factor productivity exhibited increasing trends and high positive growth rates, except during 1989-90 (the period of the political troubles in Tiananmen Square). We find that the inclusion of rural transformation increases the average growth rate of factor productivity by nearly one percentage point during the post-reform period, thus making our estimates of total factor productivity growth higher than those reported by previous studies.

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