A Study of How Market Entry and Exit Matter for Productivity in China’s 426 Industries*

7月 21, 2016

in : 2013 , 2013-1

Li Ping 1, Jian Ze 2 and Jiang Feitao 3
1 Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences, Beijing, China
2 School of Economics and Management, Tongji University, Shanghai, China
3 Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing, China

Abstract: Based on extensive micro data sets, this paper examines the relationship among large-scale entry and exit, competition and total factor productivity (TFP) growth of China’s industry during economic transition and market opening. We have arrived at these findings: market opening spurs entry and exit of large numbers of non-state-owned enterprises (non-SOEs) and facilitates dynamic competition; through the stimulation effect of competition, entry and exit push TFP growth on the part of enterprises; through the resource reallocation effect, entry and exit promote growth of the aggregate TFP.However, results indicate that the resource allocation efficiency remains very low in capital-intensive industries where the government intervenes a lot. To conclude,promoting open competition is significant to the growth of industrial sectors’ productivity.
Key words: market opening, entry and exit, competition, total factor productivity (TFP)

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