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Government subsidy and aggregate productivity dynamics: Evidence from China
Author(s) -
Yue Wen
Publication year - 2021
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12345
Subject(s) - total factor productivity , subsidy , economics , productivity , china , aggregate (composite) , technological change , government (linguistics) , labour economics , macroeconomics , market economy , linguistics , philosophy , materials science , political science , law , composite material
Based on data for Chinese manufacturing firms from 1999 to 2007, this study explores the dynamic evolution of aggregate total factor productivity (TFP) from the perspective of firmsʼ entry and exit. It also quantifies how government subsidies influence the aggregate productivity growth. By decomposing aggregate productivity growth into components, including technological progress, reallocation, entry, and exit effects, we found that aggregate TFP growth in Chinese manufacturingfollows an upward trend during the sample period. This tendency originates from the contribution of technological progress, reallocation, and exit effects. Moreover, the effects of these four components on aggregate TFP growth of different industries, regions, and ownership types are different. Furthermore, technological progress, reallocation, and exit effects are important pathways for government subsidies to promote aggregate TFP growth in Chinese manufacturing.