Misallocation And Manufacturing TFP

Using the Chinese Manufacturing Enterprises Database(1998-2007),we have measured the loss of TFP induced by the distortions in the city-level for the first time,our research finds that the the low cost ratio in the land leasing market is just the key reason. If the local government transfer more benefits to the private sector,this reform would promote the TFP so greatly that contribute to the extent of 50% if we try to maintain the GDP growth in the range of 7%-8% for the next ten years.The descriptive statistics in the level of country、region、province and industry also tell us that the balanced development strategy of different districts is successful and the degree of distortions in the competitive industries fall while monopolistic industries rise in the last ten years.The academic contributions of this paper include as follows:1) we have found firstly the distortions of TFP in the city level come from the low cost in the land leasing market paid by the local government; 2)the different robust tests by using four methods measuring TFP comfirm the conclusion more certainly and we firstly attempt to establish the connection between housing price and loss of TFP induced by the distortions,which help us understand the relationship of both better; 3) we prove the necessity of reform in the monopolistic industries and continuing to implement the balanced development strategy of different districts.The policy suggestions of this paper focus as follows:1) the reform in the land leasing market should be drafted as soon as possible for the reason that the local government grab the benefits too much, which may bring China to the middle income trap; 2) the reform in the monopolistic industries should be formulated for the benefits of promoting the TFP by removing the distortions and introducing competitions, which have proved by the facts happen in the competitive industries like food and drinks in the last ten years.