Analyzing China's productivity growth: Evidence from manufacturing industries

This article examines the growth attributes of manufacturing industries in China for the sample period of 1999-2007. The output growth of manufacturing industries classified under four groups and four regions is decomposed into four components of input growth, scale effect, technical progress, and technical efficiency change. A stochastic frontier model is applied to the translog production function to estimate technical efficiency. Despite the conventional argument that input growth and technical progress are important factors to output growth, the empirical findings show a significant scale effect but a weak technical efficiency change. The contribution to growth from labor has been replaced by human and physical capitals. Structural transformation in the industrial sector is evident, so as regional imbalances.

► This paper studies the growth factors in China's manufacturing industries, industrial productivity, technological progress and efficiency. ► The industrial output growth is divided into input and TFP growth, adjusted scale effect, technical progress, and technical efficiency change. ► Considered two types of stochastic frontier models with time-invariant technical inefficiency and time-varying decay technical inefficiency; output growth is largest in the East. Labor has the largest output elasticity among the three inputs. ► Industrial production exhibited increasing returns to scale. Technical progress is most important. ► China's industrial strength is based mainly in input growth, and the improvement in technical progress.