Decomposition of Economic and Productivity Growth in Post-reform China

This paper examines and applies the theoretical foundation of the decomposition of economic and productivity growth to the thirty provinces in China’s post-reform economy. The four attributes of economic growth are input growth, adjusted economies of scale effect, technical progress, and efficiency growth. A stochastic frontier model is used to estimates the growth attributes, and a human capital variable is incorporated in the translog production function. The empirical results show that input growth is the major contributor to economic growth and human capital is inadequate even though it has a positive and significant effect on growth. Technical progress is the main contributor to productivity growth and the scale economies has become important in recent years, but technical efficiency has edged downwards in the sample period. The relevant policy implication for a sustainable post-reform China economy is the need to promote human capital accumulation and improvement in technical efficiency.