Allocation of resources within subgroups of an industry: a case study in the Chinese industrial sector

Chun kei Tsang*, Sung Ko LI

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    2 Citations (Scopus)

    Abstract

    Facing bottlenecks of economic growth, two important policy concerns of the Chinese government are the regional fragmentation and ownership distortion. This paper extends the method of measuring structural efficiency of a group of firms to the existence of subgroups of firms to evaluate such issue. Without knowing the “true” prices, we argue that there is an output-oriented solution to the economy. We then apply this new method to the Chinese industrial sector from 2005 to 2014 as a case study. We found that resources were allocated efficiently among different regions but not within regions. In contrast, resources were allocated efficiently within different ownerships but not among ownerships. Specifically, by eliminating inefficient resource allocation among different ownerships, outputs of the whole industrial sector could be increased by 21% of the observed levels. These two findings cannot be derived directly from other existing methods. Our results advocate different directions to conduct further regional and ownership reforms in China.

    Original languageEnglish
    Pages (from-to)125-139
    Number of pages15
    JournalJournal of Productivity Analysis
    Volume53
    Issue number1
    DOIs
    Publication statusPublished - 1 Feb 2020

    Scopus Subject Areas

    • Business and International Management
    • Social Sciences (miscellaneous)
    • Economics and Econometrics

    User-Defined Keywords

    • Chinese industrial sector
    • Output-oriented structural efficiency
    • Ownership reform
    • Revenue structural efficiency
    • Western development strategy

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