| Economic growth is associated with financial development. The optimization of asset allocation helps to improve the efficiency of the economic development. The growth of Total Factor Productivity(TFP) mainly depends on the technology upgrading, workforce improvement and the asset allocation efficiency.A lot of literature focused on the study of the technology and workforce effect on TFP, ignoring the impact of asset allocation. Financial liberalization can improve the efficiency of asset allocation, reduce financial friction, increase access to financing, thereby raising TFP growth rate. This paper use China Industrial Enterprises database from1998-2007, a total of more than340,000non-balanced firm level panel data, scattered in41two-digit industries to explore the effects of China’s financial liberalization on TFP growth.We use principal component analysis(PCA) to construct the financial liberalization index of China from1978-2007, finding that although the financial liberalization in China is still in its initial stage, it is improving especially after joining the WTO in2001.Besides, we use four different methods to estimate the growth of TFP base on our database separately. We find that OP method is better. The estimates show that the TFP growth of China spirals since the Southeast Asian financial crisis. To better understand the effect of financial liberalization on firm TFP growth, we do the empirical analysis by comprising, according to firm ownership and size. First, we find that the enhancing effect of finance accessing on TFP growth is passively correlated with firm’s size, but positively with level of privatization. It is consistent with the condition that financial constrain happens more in small and private firm. Secondly, the financial liberalization has influenced the allocation of loans eventually leading to the improvement of the TFP growth of the smaller firms but not for the large firms, the private firms not the state-owned firms. |
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