Impact of biased technological progress on the total factor productivity of China's manufacturing industry: The driver of sustainable economic growth

Abstract

Sustainable economic growth relies on an increase in total factor productivity (TFP). To upgrade the core competitiveness and support the sustainable growth and high-quality development of China's economy, ascending TFP in China's manufacturing industry counts. This study analysed the impact of biased technological progress on TFP, which was estimated by using the relevant data of 27 subsectors of China's manufacturing industry from 1980 to 2019. The results revealed that from the early industrialisation period (1980–2000) to the mid-industrialisation period (2001–2012) and then to the middle and late industrialisation period (2013–2019), the mean value of TFP in China's manufacturing industry grew from 0.291 to 0.394 and then to 0.555, embodying a continuously upwards advancing tendency. Technological progress was capital biased from 1981 to 2011 and labour biased during the rest of the sample period. In addition, its direction was heterogeneous among various industries. To some extent, the growth of TFP has been hindered by biased technological progress and factor allocation. The per unit increase in them has led to 1.495 and 1.017 unit decreases in the TFP. Upon examining the factor efficiency and the factor structure, we found that the estimated coefficients of biased technological progress dropped to −1.516 and −1.719, preventing TFP from growing to a greater extent. Consequently, there is room for their optimisation in China's manufacturing industry.