Exports, technical progress and productivity growth in a transition economy: a non-parametric approach for China

Abstract

Theories suggesting either static or dynamic productivity gains derived from exports often assume the prior existence of a competitive market. In the presence of market imperfection and distortion, however, the competition and resource reallocation effects of exports on productive efficiency may be greatly reduced; and there may actually be disincentives for innovation. This paper analyses the impact of exports on aggregate productivity growth in a transition economy using a panel of Chinese manufacturing industries over the period 1990–1997. TFP growth is estimated by employing a non-parametric approach and is decomposed into technical progress and efficiency change. No evidence has been found suggesting significant productivity gains at the industry level resulting from exports. Findings of the current study suggest that, for exports to generate significant positive effect on TFP growth, a well-developed domestic market and a neutral, outward-oriented policy are necessary.

Acknowledgements

The author is grateful to V. N. Balasubramanyam, Wing Thye Woo, Antonio Alvarez, Harry Wu and conference participants at the 2004 North American Productivity Workshop, Toronto for their helpful comments, and to the Centre for Business Research, University of Cambridge and Lancaster University Management School for financial support.

Notes

The index is named after Sten Malmquist (1953) who had proposed constructing quantity indexes as ratios of distance functions.

Output distance function is reciprocal to the output-based Farrell measure of technical efficiency.

For details see Fare et al. (1994) and Coelli (1996).

Recently some economists have argued the official data for China is not accurate and the GDP growth rates are overestimated. Chow (1993) discussed the quality of official Chinese statistics and concluded that, although there are a number of potential problems in data collecting and processing, the official data were valid overall for macroeconomic research. Labour productivity growth of the Chinese manufacturing industries was estimated using both the official data and the non-official data processed in Wu (2001). The estimated average real labour productivity growth rate of the export-industries are 11.5% for the official data and 14.2% for Wu's data, while that for the non-export industries for the official and Wu's data are 8.8 and 7.5%, respectively. The general picture of growth of productivity for export and non-export industries presented by the official and non-official data are similar. This suggests that the official data should be valid for the examination of the impact of exports across industry branches.

The steps of deflation of fixed assets follow Jefferson et al. (1996); the price index used as deflators are collected from China Statistical Yearbook.

The p-value of the t-test for paired sample is 0.009, suggesting the mean of the scale efficiencies of the two industry groups are significantly different from each other.

The average foreign capital to net fixed asset ratio for export industries was 0.34 in 1995.