The Effect Of Government Intervention On Cross-sector Resource Misallocation In Manufacturing

The gap between rich and poor across countries or regions largely depends on TFP,short for total factor productivity.It is a important way to analysis the economic growth.Studies have shown that resource allocation have great effect on TFP.The existing studies mainly focus on the negative impact on TFP from resource misallocation,some of them also discuss the possible relationship between state-owned enterprises and resource misallocation,but they didn't go further to research the relationship between government intervention and resource misallocation.The market economic reforms in China have not finished yet,and government still has great effect on resource allocation.So,based on the existing studies,this article will study the effect of government intervention on resource misallocation.First,in order to measure the degree of cross-sector resource misallocation,we choose theoretical model to calculate the relative coefficient of the factor price distortion across sectors in manufacturing.Then,we use the longitudinal micro-level data from Chinese industrial enterprises database and FGLS method to do a regression analysis.The explanatory variables in model include credit discrimination,financial subsidies,administrative entry barriers and labor mobility.The control variables include industry concentration and foreign trade dependence rate.We find that the output loss caused by cross-sector resource misallocation is above 6%per year,and government intervention affects it in various ways.The credit discrimination has significant impact on it,which means the government-led financial system caused great credit resource misallocation.Financial subsidies don't have significant effect on cross-sector resource misallocation,a possible explanation is that most subsidies are given to infant industries or high-tech industries,which are small in scale,another possible explanation is that the financial subsidies are put into most sectors,so they have small impact on cross-sector resource misallocation,but have great effect on resource misallocation within sectors.Moreover,administrative entry barriers and labor mobility also have significant influence on cross-sector resource misallocation,as well as industry concentration and foreign trade dependence rate.