Structural Change, Productivity Growth, Regional Development, Trade, Industrial Dynamics, Income Inequality

Structural change, labour reallocation and productivity growth in post-reform China (2024), Oxford Economic Papers

[Abstract]  Why has the structural bonus been so small during China’s post-reform era? This article explains the puzzle by exploiting the heterogeneity in structural-change patterns across Chinese provinces. Using an original database covering production and factor inputs in 8 sectors and 31 provinces over 1993–2016, I show only those provinces where labour was reallocated from agriculture to manufacturing and services benefited from a structural bonus on labour productivity growth. In the other provinces, this structural-change effect was minimal or negative. Regarding the structural-change effect on total factor productivity (TFP) growth, I find both labour and capital reallocation played a limited role. Labour reallocation has little potential in boosting aggregate TFP growth, as marginal labour returns are similar across sectors. Capital reallocation has a far greater potential but remains restrained, suggesting substantial reallocation frictions. China’s TFP growth is mostly explained by within-sector technological progress, which has been dissipating since 2008, leading to declining TFP growth.

[Keywords] China, factor reallocation, productivity growth, provincial disparities, structural change

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[1] Comparative advantage, endowment structure and regional specialization in China (in review)

[Abstract] This paper quantifies the roles of the classical trade determinants in driving the industrial specialization pattern across Chinese provinces. The paper constructs an original database at the province-sector level, tracing the industrial dynamics across 25 industrial sectors and 31 provinces from 1990 to 2016. Empirical measures of specialization and trade determinants are explicitly grounded on a theoretical framework of partial equilibrium model, allowing to explain the provincial specialization across multi-sectors by both Ricardian and Heckscher-Ohlin (HO) predictions. The empirical results show that the provincial specialization is jointly determined by Ricardian comparative advantage revealed in TFP and HO endowment condition, with determinants of new trade theories being controlled for. The Ricardian determinant is more powerful and persistent than HO determinant. Besides, industrial dynamics is more impacted by classical trade determinants than by its own inertia, implying that China’s regional specialization is self-adjusting rather than path-dependent.

 [Keywords] China, industrial structure, regional specialization, comparative advantage, factor endowments

[2] Structural change and regional income convergence: evidence from China (with Lise Patureau)

[Abstract] This paper investigates the link between structural change and provincial income convergence in China. Based on a simple model that decomposes the growth of income per capita at the province level as the sum of the within-sector TFP growth rate, the capital deepening (measuring the increase in the capital-labor ratio) and the cross-sector factor reallocations in both labor and capital (e.g, structural change), we quantify the contribution of each term to the catching-up process to the frontier province (e.g., Shangai). We thus assess the role of sectoral factor reallocation in the convergence process à la Barro. We will hence use the richness of our database to identify whether some patterns of structural change do favor a catch-up process, in contrast to others. If so, these results would yield important policy implications regarding the way to achieve a more balanced growth path in China.