Business Environment and Resource Allocation Based on the Perspective of the National Value Chain.

Abstract

China is actively upgrading its industrial structure through industries transferring between developed and undeveloped areas; however, the overall level of the national value chain is still not high, and the asymmetric competition pattern between the upstream and the downstream has not been broken. Therefore, this paper establishes a competitive equilibrium model for the production of manufacturing enterprises, with factor price distortion, under the condition of constant returns to scale. The authors derive the relative distortion coefficients of each factor price, calculate the misallocation indices of capital and labor, and construct an industry resource misallocation measure. Furthermore, this paper applies the regional value-added decomposition model to calculate the national value chain index and matches the market index of the China Market Index Database with the Chinese Industrial Enterprises Database and the Inter-Regional Input-Output Tables through quantitative analysis. From the perspective of the national value chain, the authors study the improvement effect and mechanism of the business environment on the resource allocation in industry. The study shows that industry resource allocation will be improved by 17.89% if the business environment level is improved by one standard deviation. This effect is most prevalent in the eastern and central regions, not so much in the west; the effect of downstream industries in the national value chain is higher than that of upstream industries; the improvement effect on capital allocation is higher in downstream industries than in the upstream industries; and the improvement effect on labor misallocation is basically the same in both the upstream and the downstream. Compared with labor intensive industries, capital intensive industries are more influenced by the national value chain, while the effect of upstream industries is weaker. At the same time, it is well documented that participation in the global value chain can improve the efficiency of regional resource allocation, and the construction of high-tech zones can improve resource allocation for both upstream and downstream industries. Based on the results of study, the authors propose suggestions for optimizing business environments, suiting the national value chain construction, and improving resource allocation in the future.