Essays on Industrial Productivity in Twentieth Century China

My dissertation identifies factors which led China's industrial productivity to lag behind that of other East Asian countries for most of the twentieth century. The dissertation is divided into three papers, each of which examines some facet of Chinese institutions or state policy which constrained productivity growth in industry.;The first paper examines British and Japanese competition in the 1920s and 1930s Chinese textile industry. Pre-WWII Japan, particularly in its textile industry, succeeded in rapidly mastering industrial technologies, while other developing countries, such as China and India, struggled. To indentify factors which affect the ability of countries to borrow technology, I investigate British and Japanese attempts to transfer textile technologies to China. I find that Japanese-owned firms established efficient plants in China with total factor productivity levels similar to those in Japan, and approximately 80 percent higher than those of Chinese-owned firms. British-owned firms, by contrast, performed poorly even in comparison to domestically-owned firms. Japanese textile companies' superior performance was due to the application of Japanese methods of labor management which were effective in both China and Japan. Conversely, poor British performance is explained by their use of a British management system which performed exceptionally poorly in the presence of Chinese labor market institutions. The research shows that managerial knowledge is not necessarily transferable across countries, and that a shared institutional background can lead to more productive flows of knowledge.;The second paper examines the effect of the 1978 introduction of managerial and worker incentives on productivity levels in Chinese state-owned enterprises. Previous studies have found that incentives increased effort levels and led to large increases in productivity, but have not investigated whether these increases persisted over time. This is important because creating strong incentives to increase short-run production could have encouraged managers and workers to neglect activities which contributed to long- run growth, such as investment, planning, and research. I collect a unique panel of compensation, employment, and output statistics covering all firms in the Chinese iron and steel industry and use this data to estimate short-run and long-run effects of incentive use on labor productivity. The results indicate that incentives had large negative effects on future labor productivity, and that, overall, they reduced the rate of labor productivity growth during the 1980s by about one-third.;The third paper analyzes how closure of the foreign capital goods market affected industrialization in Communist China. During the 1950s, most capital equipment in China was imported from the Soviet Union, but due to a collapse in Sino-Soviet relations, China shifted to a near exclusive reliance on domestically produced equipment in the 1960s and 1970s. To investigate the effects of the closure of trade in capital goods, I collect sector-level data for 12 industries and plant-level data for the iron and steel industry and use these to estimate the relative productivity of capital goods of different vintages. I find that Soviet-produced machines installed during the 1950s were much more cost-effective than domestically-produced substitutes installed during the 1960s and 1970s. These effects are large, and, at least in the iron and steel industry, they appear to completely explain the decline in industrial performance which China experienced during the 1960s and 1970s.