Disaggregate productivity growth sources of regional industries in China

Abstract

This paper extends a global slack-based productivity indicator and constructs a unified framework that consists of global and factor levels of total factor productivity (TFP) to evaluate the performance of regional industries, thus enabling global productivity improvement based on factor-level sources. Evaluating regional industrial performance in China during 1995-2014, the findings reveal that rapid growth of industry in China is not only driven by a huge amount of input, but also by TFP improvement, with industrial productivity driven mainly by technology progress and presenting a gradually increasing trend. Regional productivity performances are imbalanced, in which the east ranks first due to its dual advantages of input and output factors. For source identification, input and output jointly contribute to industrial productivity improvement, but output has a much higher contribution ratio to industrial productivity improvement than input, because it is mainly rooted in desirable output. Finally, on the input side, labor is the primary factor driving input productivity improvement followed by energy, while capital productivity shows very slight growth.