Technological sources and regional productivity growth in China

Abstract

This paper looks into whether China's continuously high economic growth is mainly contributed by productivity growth after the mid-1990s when it has devoted more efforts to innovative activity. More importantly, I also systematically investigate how and to what extent various technological sources contribute to productivity growth in China. Identifying the internal and external technological sources, this paper adopts a newly developed technique of the stochastic metafrontier function to evaluate regional productivity growth in China and then analyzes the impacts of technological sources on moving up the technology ladder in China. The first-step estimation shows that the average productivity growth is 2.821% during 1996–2004, which is similar to that before 1995. However, the coastal and non-coastal regions witnessed an apparent difference in total factor productivity (TFP) growth, 4.567% vs. 1.718%. Concerning the effects of technological sources, in-house research and development (R&D), foreign direct investment (FDI) and technology import are all positive on significantly promoting productivity. Relative to R&D and FDI, the contribution through importing technologies seems to be larger, implying that China's technological progress relies heavily on more advanced foreign knowledge. However, neither technological source is found to have a larger influence on productivity growth among non-coastal regions.