What Drives the Volatility of Firm Level Productivity in China?
The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. With the deepening of market economy, the share of the state-owned and collective enterprises declined. Expansion and contraction, as well as establishmen...
| Main Authors: | , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/04/19447081/drives-volatility-firm-level-productivity-china-drives-volatility-firm-level-productivity-china http://hdl.handle.net/10986/18327 |
| Summary: | The enterprise reforms of the 1990s
profoundly changed the structure of the economy in China.
With the deepening of market economy, the share of the
state-owned and collective enterprises declined. Expansion
and contraction, as well as establishment and closure, of
firms became a common phenomenon. The level and volatility
of firm productivity have become increasingly important
aspects of the micro performance of the economy. This paper
uses a firm-level data set collected annually by the
National Bureau of Statistics of China in 1998-2007 to
examine the role of different firm characteristics in
productivity volatility. The paper measures productivity
volatility at the firm level as the standard deviation of
the annual growth rate of productivity. The main objectives
are twofold: first, it examines the variation of
productivity volatility across firms of different
characteristics and their evolution over time; second, it
investigates the sources of productivity volatility at the
firm level in China. The results suggest that in general,
productivity volatility at the firm level has declined over
time in China. Among firms with different characteristics,
large firms, old firms, foreign firms, and firms located in
the coastal provinces are less volatile. Firm size and
location are the two major factors that drive changes in
productivity volatility, one in a positive way and one in a
negative way. Although the gaps of volatility between
smaller firms and larger firms declined, the gaps between
firms located in the coastal provinces and inland provinces increased. |
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