Cross-border And Cross-country Factor Flow And Productivity Improvement

The source of China's rapid economic growth has always been one of the hot topics for economists.In the short span of 21st century,China had surpassed France,Britain,Germany and Japan to be the world's second strongest economic power by America.How to continue to keep China' rapid and sustainable growth is of great significance to perfecting Socialist Market Economic System with China's Characteristic and realizing the great rejuvenation of the Chinese nation.This paper's research is to deeply analyze the mystery of China's rapid economic growth.In the late 1990s,in order to construct socialist market economic system,China conducted an in-depth market-oriented structural reform,which resulted a large amount of cross-border and cross-country factor flows.Specifically,the government started a "Grasp the Large and Let go the Small"state.sector competitive reform.That is to grasp the large state-owned enterprises and let go the small state-owned enterprises.Then a large amount of production factor flew from state sector to competitive non-state sector.In the other side,the successful negotiation with the WTO made China one of the members of the global trade system.Growing export made the knowledge factor flow into China.Fast increasing FDI made production factor flow from the domestic sector to the foreign sector.The factor flow produced the optimal allocation of resources,which triggered economic efficiency reformation.Based on 1998-2007 China's manufacturing industry firm-level data,this paper uses ACF production function estimation method and obtain the parameter estimation of manufacturing industry production function,thus calculating and getting the firm-level total factor productivity and markup.In the detailed calculation process,this paper follows LP's idea and use the intermediate input as the proxy of productivity,controlling firm-level ownership and export status variables,and finally obtain the consistent estimation of each production function parameter in the second stage of estimation by GMM method.Based on the estimation results of firm-level markup and TFP,this paper analyzes the impact of factor flow on manufacturing industry firms' efficiency from the view of knowledge factor cross-country flow and production factor cross-border flow.Thus we have the following conclusion:First,knowledge factor cross-country flow is one of the reasons that China's capital-intensive enterprises' exporting to improve markups.The third chapter of this paper puts forward the mechanism hypothesis how firms export to improve markups.Then in the fourth chapter,this paper uses an intermediation effect model to test the hypothesis.The results show,capital-intensive manufacturing industry firms export and improve the markups.The improvement of innovativeness is the intermediation of this mechanism.In the process of capital-intensive manufacturing industry firms' exporting,knowledge factor flows from foreign market into those domestic capital-intensive manufacturing industry firms.The latter improves the innovativeness by the inflow knowledge factor and finally improves the markup(market power).This paper uses R&D and new product production as the proxy of firm innovativeness and the results are consistent.In the other side,the econometric results show that labor-intensive manufacturing industry firms export without improving markup.The innovativeness as the intermediation factor does not play a similar role as in the case of capital-intensive manufacturing industry firms.Second,FDI's enter makes production factor flow from domestic sector into foreign sector.The resources are optimally reallocated.This process explains 9%of 1998-2007 manufacturing industry's TFP improvement.In the year 1998,firms in the foreign sector is 40%more productive than the firms in the domestic sector.With the former sector's expansion,labor,capital and other production factor flows from domestic sector to foreign sector.The resources are optimally reallocated,which contributes 9%of manufacturing industry 1998-2007 TFP improvement.In the process of resource optimal reallocation,the domestic sector's TFP grow faster,which makes the TFP difference between two sectors gradually reduce until disappear.From the view of domestic sector's dynamic evolution,the TFP can be decomposed into net entry,plant improvement and reallocation.The results show that net entry and plant improvement play the major role in the process of TFP improvement of overall manufacturing industry,domestic sector and foreign sector.Third,state sector reformation makes the production factor flow cross border from state sector into non-state sector.The factor flow makes the resource optimally reallocated,which explains 25%of manufacturing industry TFP improvement.In the year 1998,firms in non-state sector is 100%more productive than ones in state sector.State sector reformation results into that labor,capital and other factor flow into non-state sector.The expansion of more efficient non-state sector makes the resources optimal reallocated,which contributes 25%of 1998-2007 manufacturing industry's TFP improvement.The mean productivity of the firms in state sector grows faster in the process of resource optimal reallocation and the difference of mean productivity decreases to 40%between the two sectors in the last year 2007 in the sample duration.From the view of domestic sector's dynamic evolution,the TFP can be decomposed into net entry,plant improvement and reallocation.The results show that plant improvement and net entry play the major role in the overall manufacturing industry productivity growth.This is the same with the non-state sector.However,to the productivity growth of state sector,plant improvement and reallocation play the major role.This paper reveals the source of efficiency improvement in China's economic growth from three perspectives,namely firm's export to improve productivity,FDI's entry and state sector's reformation to optimally reallocate resources.This paper's results offer theoretical basis and policy guidance to perfect Socialist Market Economy System with Chinese Characteristic.