| Abstract | Through establish a model of monopolistic competition with heterogeneous firms, this paper gives a more accurate expression to measure Chinese manufacturing TFP loss caused by capital misallocation, then we make the empirical analysis and robust tests of manufacturing establishments TFP loss caused by capital misallocation from 1998 to 2007. Unlike most of relative literatures, in this paper, We find the manufacturing TFP loss caused by capital misallocation from 1998 to 2007 is increasing by year, increasing from 23.6% to 34.7%. In addition, in every year, after divide enterprise to groups we split manufacturing TFP loss caused by capital misallocation into two parts, one part is due to enterprise of each industry in each group have different capital allocation distortion; the other part is due to enterprise of each group in each industry have different mean of capital allocation distortion. Then we analyzed the corresponding TFP loss of enterprise grouped by age, grouped by ownership and grouped by size, we have the first part of year average manufacturing TFP loss of age group, ownership group and size group are 26.9%, 25.5% and 19.3% respectively, and the second part of year average manufacturing TFP loss are 0.49, 1.6% and 8.0% respectively. |