Sources of production inefficiency and productivity growth in China: A global data envelopment analysis

- We conduct this research with the application of global data envelopment analysis.
- The productivity inefficiency is decomposed into seven components.
- The productivity growth is decomposed into three components.
- Technical progress is the most powerful contributor to China's productivity growth.
- The efficiency of capital utilization in China presents a downward trend.

The current mode of production in China is extensive and inefficient and has caused great stress on both resources and the environment. This paper focuses on analyzing the sources of production inefficiency and productivity growth in China. Here, a developed slacks-based measure is utilized to decompose production inefficiency into three components: input inefficiency, economic output inefficiency, and environmental inefficiency. Furthermore, by applying a method based on global data envelopment analysis, we take a further step to analyze the key factors responsible for the change of environmental productivity during 2003-2011 from the point of view of technical progress, productive scale, and management level. The results show that, redundancy in energy and labor inputs, and excessive emission of sulfur dioxide, chemical oxygen demand, and ammonia nitrogen, are the main sources of production inefficiency in China. During the sample period, the efficiency in all inputs and environmental emissions has improved (except for capital input efficiency, which had a decreasing trend). Further analysis shows that the overall environmental productivity in China has begun to follow an ascending path. Technical progress is the most powerful contributor to China's productivity growth, while the decreases in scale and management efficiency are the two main obstacles preventing productivity improvement.