Enterprise Mismatch, Technology Mismatch And Total Factor Productivity

In the process of economic transition in China, many of the system characteristics, government policies and imperfect market can lead to market distortions, these market distortions changed the price of products and factors that the firms face with, which could lead to factors misallocation between firms. Hsieh and Klenow (2009) pioneered the theoretical analysis framework of firms’ factors misallocation and total factor productivity loss, and according to their research methods, domestic scholars have done some empirical analyses on the factors misallocation in China’s manufacturing sector and the total factor productivity loss rate, finding that there were varying degrees’factors misallocation in each industry in our country’s manufacturing sector, which led to the varying degrees’total factor productivity loss. However, the firms’ production process is the process of production technology combined with production factors, firms cannot allocate production factors better will lead to factors misallocation, so, under the given technical level, if the firm cannot choose more efficient production technology, can it lead to technology misallocation? Whether technology misallocation leads to total factor productivity loss? Based on this thinking, analysis of the formation mechanism of firms’ technology misallocation and its impact mechanism on total factor productivity in theory is the main problem discussed in this paper.The research content of this paper mainly includes:(1) the review of the relevant theories and research literatures in factors misallocation, technology misallocation and total factor productivity. (2) the theoretical analysis of firms’ factors misallocation and total factor productivity. Aiming at the deficiencies in Hsieh and Klenow’s (2009) theoretical model, namely, the hypothesis of constant returns to scale and the neglect of the intermediate product market, this paper will develop their theoretical model, and then theoretically analyze the formation mechanism of firms’ factors misallocation and its impact mechanism on industry sum total factor productivity. (3) the theoretical analysis of firms’ technology misallocation and total factor productivity. Inspired by the research literature of the firms’ manufacturabilityof design and the flexibility of production, this paper will put forward the concept "the flexibility of production technology", define the firms’ technology misallocation, and based on this, analyze the formation mechanism of firms’ technology misallocation and its impact mechanism on industry sum total factor productivity. (4) empirical analysis on manufacturing industry’s factors misallocation and total factor productivity. This paper will put forward the estimation method of factors misallocation and total factor productivity loss, measure the degrees of factors misallocation and total factor productivity loss of four representative industries in manufacturing sector, and then analyze the main source of factors misallocation. (5) empirical analysis on manufacturing industry’s technology misallocation and total factor productivity. This paper will put forward the estimation method of technology misallocation and total factor productivity loss, measure the degrees of technology misallocation and total factor productivity loss of four representative industries in manufacturing sector, and then analyze the main source of technology misallocation. (6) the policy proposals for improving factors misallocation and technology misallocation in our country’s manufacturing industry and developing the total factor productivity rate.The main conclusions of this paper are as follows:(1) there were obvious output distortion, capital distortion and technology distortion in all four representative industries in manufacturing sector; the output distortion and capital distortion have limited the expansion of the production scale of firms, hindered the flow of production factors from low-productivity firms to high-productivity firms and the production accumulation, resulting in persistent differences in productivity, the dispersed industrial organization and factors misallocation among different firms within the same industry. Compared with capital distortion, the technology distortion has a higher degree. (2) after eliminating the factors misallocation, the sum total factor productivity of all industries can be increased by 63.295% to 86.320%; on average, if there were no market distortions, the industries’ total factor productivity will increase by 75.799% a year; and the income of the sum total factor productivity rate of all industries without technology misallocation was higher than which without capitalmisallocation; compared with capital misallocation, the total factor productivity rate loss caused by technology misallocation is more serious. (3) regional market segmentation and the imperfect of financial market is the main reason for the factors misallocation, while the distortion of factor market, the imperfect of financial market, low technological complexity, the low "research development expend" are the main reasons for technology misallocation.The main innovations of this paper are as follows:(1) Aiming at the deficiencies in Hsieh and Klenow’s (2009) theoretical model, namely, the hypothesis of constant returns to scale and the neglect of the intermediate product market, this paper will develop their theoretical model:to relax the hypothesis of constant returns to scale, at the same time take the intermediate product markets into consideration, and then analyze the formation mechanism of firms’ factors misallocation and its impact mechanism on sum total factor productivity in all industries again theoretically. (2) Inspired by the research literature of the firms’ manufacturability of design and the flexibility of production, this paper will put forward the concept "the flexibility of production technology", namely the elasticity of substitution between labor enhanced production technology and capital enhanced production technology. Based on this, we define firms’ technology misallocation as:when facing market uncertainty, with the combination of different factor inputs, if the firms cannot choose the most profitable production technology flexibly, then it will result in distorted technology choice, further more, in technology misallocation. Based on this definition, this paper analyzes the formation mechanism of firms’ technology misallocation and its impact mechanism on industry sum total factor productivity. (3) Based on the theoretical analysis, this paper gives the estimation methods for firms’ factors misallocation, technology misallocation and total factor productivity loss, calibrates the parameters related to the model, and further more discusses the main sources of China’s manufacturing sector’s factors misallocation and technology misallocation.