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In Quest of Institutional Interpretation of TFP Change—The Case of China

  • Harry X. Wu EMAIL logo
Veröffentlicht/Copyright: 4. September 2019

Abstract

This research note reiterates the productivity theory in the Solow growth accounting framework to explore an institutional interpretation of changes in total factor productivity. In theory, total factor productivity or TFP growth is a costless gain in output, which captures the effect of positive externalities caused by spillovers of technological and organizational changes in a perfect market system. This provides a yardstick to gauge institutional effect on output in an imperfect market system if all inputs are properly measured. Using the Chinese case, I show that an integrated approach a la Jorgenson and Griliches (1967. “The Explanation of Productivity Change.” Review of Economic Studies 34 (3): 249–283) that ensures a consistency between theory, methodology and measurement can facilitate empirical exercises even with data problems, and a so-constructed TFP index for China can satisfactorily reproduce China’s post-reform productivity path with institutional interpretations.

JEL Classification: C80; H70; O40; P30

Acknowledgement

This article reports my work as a visiting professor at the Center for Economic Institutions (CEI) of IER, Hitotsubashi University from October 2018 to March 2019. It summarizes my long empirical pursuit to properly measure China's productivity performance at IER and my recent exploratory thinking of institutional implications of productivity change. I am very much indebted to the referee's insightful comments. I would like to thank seminar participants at CEI/IER, Hitotsubashi University for their interesting discussions. George G. Zhang, David T. Liang and Zhan Li provided excellent research assistance in updating the CIP (China Industry Productivity)/China KLEMS database. I would also like to thank CEI for generously hosting my research and the research supports from JSPS Research Grant No. 17K03678 and the RIETI Asian Industrial Productivity Program.

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Published Online: 2019-09-04

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Heruntergeladen am 24.10.2025 von https://www.degruyterbrill.com/document/doi/10.1515/me-2018-0015/html
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