Total Factor Productivity Change And The Factor Allocation Effects In China's Industrious Sector

In this paper, the stochastic frontier approach is manipulated to re-estimate the growth of total factor productivity (TFP) using the dataset of China's two-digit industrial sectors over the period 1993-200. The main findings of this paper include: (1) the growth rate of TFP estimated using the stochastic frontier approach is much lower than that of growth accounting literature; (2) after decomposing the growth rates of China's industrial TFP, we find that the technical change (TC) is the only factor that exerts lasting positive effects on the growth rate of TFP; (3) the change in factor allocation efficiency (AEC), which is a contributing factor to the growth of TFP, is found to be largely influenced by the Chinese business cycle. For the post-1990 period, for instance, the distortion in labor allocation can be accounted for by the rapid expansion of capital and the negative growth of labor inputs.