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Ownership and Productivity in Vertically Integrated Firms: Evidence from the Chinese Steel Industry

Author

Listed:
  • Loren Brandt

    (University of Toronto)

  • Feitao Jiang

    (IIE, Chinese Academy of Social Sciences)

  • Yao Luo

    (University of Toronto)

  • Yingjun Su

    (IESR, Jinan University)

Abstract

We study productivity differences in vertically integrated steel facilities using equipment-level information on inputs and output for each of the main stages in the value chain. We obtain stage-level productivity estimates by estimating a multistage production system and then integrate them into estimates for integrated facilities. At this level, we do not find statistically significant differences in productivity by ownership. This conceals important differences upstream and downstream in the value chain: private firms outperform in pig iron and steelmaking but lag in sintering. Inferior access to higher-quality raw materials and use of less automated technology are likely sources of these differences.

Suggested Citation

  • Loren Brandt & Feitao Jiang & Yao Luo & Yingjun Su, 2022. "Ownership and Productivity in Vertically Integrated Firms: Evidence from the Chinese Steel Industry," The Review of Economics and Statistics, MIT Press, vol. 104(1), pages 101-115, March.
    • Handle: RePEc:tpr:restat:v:104:y:2022:i:1:p:101-115
    DOI: 10.1162/rest_a_00923
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics

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