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Factor Flow and TFP Growth: Evidence from China’s SOEs Reform
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TitleFactor Flow and TFP Growth: Evidence from China’s SOEs Reform  
AuthorHuang Xianhai, Jin Zecheng and Yu Linhui  
OrganizationSchool of Economics, Zhejiang University;; 
Key WordsFactor flow; TFP; SOEs reform; Grasp the big, Let go the small; Supply-side reform 
AbstractIn this paper, by constructing a two-sector production function estimation framework and obtaining the consistent estimates of firm-level total factor productivity of Chinese manufacturing firms, we empirically explore the productivity effects of "Grasp the big, Let go the small" policy during the SOEs reform beginning at the end of the 1990s. We find that "Grasp the big" has increased the productivity of both SOEs and the whole manufacturing sector through the optimization and restructuring of SOEs and factor flow within the state-owned sectors, whereas "Let go the small" has negative effects on productivity of SOEs, but it has enhanced the productivity of the whole manufacturing by improving the allocation efficiency through factor flow between the state-owned sector and the private one. It accounts for approximately one third of the total productivity growth during the past ten years. The findings of this paper provide empirical evidence for better understanding the miracle of China's rapid economic growth in the 20th century. Additionally, it also has rich policy implication on further improvement of China's market economy system, and provides theoretical supports to the implementation of current supply-side reform in China. 
Serial NumberWP1152 
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