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Sector-Level Productivity, Structural Change, and Rebalancing in China

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  • Mr. Malhar S Nabar
  • Mr. Kai Yan

Abstract

This paper studies structural changes underlying China's remarkable and unprecedented growth in recent years. While patterns of structural transformation across China's provinces are broadly in line with international experience, one important difference is in labor productivity differentials between services and the rest of the economy. Specifically, the gap between labor productivity in the rest of the economy and services has widened across China's provinces as they have moved from low to middle income, which is contrary to the trend observed in cross-country experience. Evidence from a panel of China's provinces suggests that credit and labor market frictions have inhibited labor productivity growth in services relatively more than in the rest of the economy. Reducing these frictions is essential for achieving the next stage of China's development, one in which the service sector will need to play a more prominent role as an engine of growth. The evidence also suggests that improving labor productivity in services will lift the consumption share of GDP, thereby advancing the needed rebalancing of domestic demand in China.

Suggested Citation

  • Mr. Malhar S Nabar & Mr. Kai Yan, 2013. "Sector-Level Productivity, Structural Change, and Rebalancing in China," IMF Working Papers 2013/240, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2013/240
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    References listed on IDEAS

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    1. Mr. Ashvin Ahuja, 2012. "De-Monopolization toward Long-Term Prosperity in China," IMF Working Papers 2012/075, International Monetary Fund.
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    3. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    4. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    5. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 641-680.
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    Citations

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    Cited by:

    1. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    2. International Monetary Fund, 2015. "Republic of Poland: Selected Issues," IMF Staff Country Reports 2015/183, International Monetary Fund.
    3. Colin C Williams & Abbi M. Kedir, 2016. "Business Registration And Firm Performance: Some Lessons From India," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-19, September.
    4. Colin C. Williams & Abbi M. Kedir, 2017. "Evaluating The Impacts Of Starting Up Unregistered On Firm Performance In Africa," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-20, September.
    5. Fang, Lei & Herrendorf, Berthold, 2021. "High-skilled services and development in China," Journal of Development Economics, Elsevier, vol. 151(C).
    6. Ms. Longmei Zhang, 2016. "Rebalancing in China—Progress and Prospects," IMF Working Papers 2016/183, International Monetary Fund.
    7. Colin C. Williams & Alvaro Martinez-Perez, 2016. "Evaluating the impacts of corruption on firm performance in developing economies: an institutional perspective," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 16(4), pages 401-422.
    8. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Levels of structural change: An analysis of China's development push 1998-2014," Papers 2005.01882, arXiv.org, revised Sep 2020.
    9. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2022. "Levels of structural change," Journal of Evolutionary Economics, Springer, vol. 32(1), pages 35-86, January.
    10. Majid, Nomaan., 2015. "The great employment transformation in China," ILO Working Papers 994892543402676, International Labour Organization.

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