Production efficiency under different economic regimes: The case of the Chinese cotton yarn industry

The diverse economic regimes China has experienced in the recent past offer an opportunity to study how economic policy influences economic behavior, particularly the impact of central planning on resource productivity.;Results of this study suggest a relatively large (20 percent) decline in total factor productivity in the Chinese cotton yarn industry between 1922 to 1936 and 1952 to 1986. This drop is attributed to a decline in resource productivity, accompanied by very modest gains from exogenous technical change. Consistent with previous economy-wise studies (Rawski, 1988 and McMillan, 1988) the effect of the 1978 reforms on total factor productivity for the cotton textile industry appears to be positive. However, formal statistical tests indicate it is not statistically insignificant. This study is consistent with previous finding that the cotton textile in China is increasing its production efficiency after the 1978 reform.;The findings in this research likely reflect trends for the industrial sector in China as a whole for the past few decades. Findings in this thesis help to understand how the economic agents response towards different institutional design. The experience of the Chinese cotton industry for the past few decades can reflect the experience of changes in institutional design on a larger scale.;Published research on the impacts of institutional effects on Chinese productivity relates mainly to the period after 1952. New researche focuses largely on the effects of the 1978 reforms. This study relies on a unique pooled cross section data set to obtain econometric estimates of total factor productivity for the cotton yarn industry for the period 1922 to 1986 identifying the aggregate effects of changes in economic regime. Unlike post reform China, which is a modification of the central planning regime, there is a sharp contrast in both market structure and institution before and after 1949. This thesis compares the performance of the cotton textile industry under the market economy that existed before 1949, the central planning regime after 1949, and the "reform" period since 1978.