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Technical Change and Total Factor Productivity Growth: The Case of Chinese Provinces

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  • Almas Heshmati
  • Subal C. Kumbhakar

    (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)

Abstract

In the literature technical change is mostly assumed to be exogenous and specified as a function of time. However, some exogenous external factors other than time can also affect technical change. In this paper we model technical change via time trend (purely external non-economic) as well as other exogenous (external economic) factors (technology shifters). We define technology index based on the external economic factors which are indicators of ¡®technology¡¯. Thus our definition of production function is amended to accommodate everal technology shifters which are not separable from the traditional inputs. That is, these technology shifters allow for non-neutral shift in the production function. In doing so we are able to decompose technical change (a component of TFP change) into two parts. One part is driven by time (manna from heaven) and the other part is related to producer specific external economic factors. These exogenous technology shifters are aggregated (via hedonic aggregator functions) into several groups (technology indices) for parsimonious parametric specification. The empirical model uses panel data on Chinese provinces. We identify a number of key technology shifters and their effect on technical change and TFP growth of provinces.

Suggested Citation

  • Almas Heshmati & Subal C. Kumbhakar, 2010. "Technical Change and Total Factor Productivity Growth: The Case of Chinese Provinces," TEMEP Discussion Papers 201054, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Feb 2010.
    • Handle: RePEc:snv:dp2009:201054
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    Cited by:

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    2. Chen, Qianying & Funke, Michael & Paetz, Michael, 2012. "Market and non-market monetary policy tools in a calibrated DSGE model for mainland China," BOFIT Discussion Papers 16/2012, Bank of Finland Institute for Emerging Economies (BOFIT).
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    More about this item

    Keywords

    Technical change; total factor productivity growth; technology indicator; technology shifter; Chinese provinces;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • 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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