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Structural change, labour reallocation, and productivity growth in post-reform China

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  • Wenliang Li

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.

Suggested Citation

  • Wenliang Li, 2024. "Structural change, labour reallocation, and productivity growth in post-reform China," Oxford Economic Papers, Oxford University Press, vol. 76(4), pages 1147-1167.
    • Handle: RePEc:oup:oxecpp:v:76:y:2024:i:4:p:1147-1167.
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    File URL: http://hdl.handle.net/10.1093/oep/gpae008
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    More about this item

    Keywords

    China; factor reallocation; productivity growth; provincial disparities; structural change;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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