New estimates and a decomposition of provincial productivity change in China

- Shanghai, Beijing and Guangdong exhibited the highest levels of total factor productivity (TFP) over the sample period.
- Coastal provinces as a group consistently exhibited higher levels of TFP and efficiency compared to inland provinces.
- The average annual TFP growth rate across all provinces over the sample period was rapid at 6.5%.
- Productivity growth was driven by technical change, with a supplementary role played by scale-mix efficiency change.
- The rate of TFP growth varied widely from province to province, as did the composition of TFP growth.

Productivity and efficiency change lies at the heart of achieving sustainable growth in China. This paper computes and decomposes provincial-level Färe-Primont TFP indexes for the period 1978 to 2010. On average across provinces, we find evidence of rapid TFP growth mostly due to technical change, but with changes in scale-mix efficiency also playing a supplementary role. Considerable heterogeneity from province to province is also documented both with respect to the rate of TFP growth and its components. Policy implications are discussed.