Factor Quality,Resource Misallocation and TFP Decomposition

Factor Quality,Resource Misallocation and TFP Decomposition


Author:Zhang Yishan,Hu Qian Journal:Economic Review Date:2019(1)

Abstract: This article builds a resource misallocation model based on the characterization of input factor quality, and obtains a more detailed factor decomposition of total factor productivity. We use China’s panel data of eight industries from 1996 to 2012 to study the positive and negative effects of capital and labor misallocation on economic growth, and examine the relative impact of factor quality improvement on economic growth. We find that factor misallocation change and factor quality improvement have significant impacts on economic growth, and the effect of capital misallocation in industry is the largest, which is the main source of the misallocation effect of capital in the economy; the labor misallocation effect of agriculture and service industries is the biggest. Compared with the substantial improvement of capital misallocation , here is still room for improvement of labor misallocation. Therefore, continuing strengthening the reform of input factor market and reducing the mobility barriers of capital and labor will promote the efficiency of factor allocation and the improvement of factor quality, and release new growth momentum.

Keywords: factor quality; capital services; resource misallocation; total factor productivity decomposition 

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