Structural reform in Central and Eastern Europe

Abstract

Since the initiative of economic reform in the late 1970s, the Chinese economy has sustained a continuously high rate of annual growth. This seemingly miraculous growth has attracted the attention of many economists in the world. In particular, major efforts have been made to examine the role of efficiency and productivity in economic growth in the postreform mainland Chinese economy and hence, to understand whether China's economic growth is sustainable or not. However, most previous studies have focused only on the industrial or agricultural sectors, perhaps due to the limitation of statistics. This paper presents an economy-wide study and hence attempts to fill the void in the literature. A stochastic frontier method is used to estimate productivity growth, which is decomposed into two components: technological progress and efficiency change. The former refers to shifts in the frontier and the latter to movement towards the frontier. Applying the newly released regional GDP data, this study aims to: (1) examine the contribution of productivity to economic growth in China, (2) investigate the sources of productivity growth in the reforming Chinese economy, and (3) shed some light on the trend of convergence and catch-up in terms of productivity performance among China's regional economies in the 1980s and 1990s.