Market distortions and aggregate productivity: Evidence from Chinese energy enterprises |
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| Affiliation: | 1. College of Economics and Management & Research Centre for Soft Energy Science, Nanjing University of Aeronautics and Astronautics, 29 Jiangjun Avenue, Nanjing 211106, China;2. Business School, Hohai University, 8 Focheng West Road, Nanjing 211100, China;1. School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China;2. Center for Energy & Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China;3. Collaborative Innovation Centre of Electric Vehicles in Beijing, Beijing, 100081, China;4. Sustainable Development Research Institute for Economy and Society of Beijing, Beijing, 100081, China;1. Collaborative Innovation Center for Energy Economics and Energy Policy, China Institute for Studies in Energy Policy, School of Management, Xiamen University, Fujian, 361005, PR China;2. The School of Economics, China Center for Energy Economics Research, Xiamen University, Xiamen, Fujian, 361005, PR China;1. State Key Laboratory of Pollution Control & Resource Reuse, School of Environment, Nanjing University, Nanjing, 210023, Jiangsu, PR China;2. School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Fujian, 361005, PR China |
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| Abstract: | Market distortions can generate resource misallocations across heterogeneous firms and reduce aggregate productivity. This paper measures market distortions and aggregate productivity growth in China's energy sector. We use the wedge between output elasticities and factor shares in revenues to recover a measure of firm-level market distortions. Using data on a large sample of Chinese energy enterprises from 1999 to 2007, our estimations provide strong evidence of the existence of both factor and product market distortions within and across China's various energy industries. The productivity aggregation and decomposition results demonstrate that the estimated aggregate productivity growth (APG) is, on average, 2.595% points per year, of which technological change, resource reallocation, and firm entries and exits account for 1.981, 0.068, and 0.546% points, respectively. The weak contributions of resource reallocation and firm turnover to APG are also found in energy sub-industries, except in the coal industry. Our research suggests that China's energy sector has major potential for productivity gains from resource reallocation through the reduction of market distortions. |
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| Keywords: | Market distortions Aggregate productivity growth Resource misallocations Chinese energy enterprises |
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