Total factor productivity growth and its decomposition in the Chinese construction industry since China's accession to the World Trade Organization

Abstract

PurposeSince China's accession of the World Trade Organization (WTO), its construction industry has attained unprecedented growth. However, for the sources of this enormous growth, a controversy regarding the total factor productivity growth (TFPG) still remains in production practice and extant studies. In view of this, the purpose of this paper is to measure TFPG and to explore its sources in the industry post-WTO accession.Design/methodology/approachThis study presents an innovative source analysis of TFPG. Stochastic frontier approach is adopted to measure TFPG and to explore its sources by decomposing TFPG into technical progress (TP), technical efficiency change (TEC), allocative efficiency change (AEC) and scale efficiency change (SEC). Although China joined WTO in 2001, to provide an effective baseline, the study period is from 2000 to 2017.FindingsThe empirical results reveal that TFPG presented an overall downward evolutionary trend, but it still maintained a high growth post-WTO accession. From the perspective of decomposition, TP was the main source of TFPG. Furthermore, as a neglected source, interaction effects among TP, TEC, AEC and SEC have been demonstrated to have a significant influence on the cumulative TFPG.Practical implicationsTo make the results be reliable, the authors discuss the empirical findings mainly by revealing the reasons behind the evolutions of TFPG and its sources. Based on these revealed reasons, government and policy makers can further refine and summarize some more detailed and targeted policy implications to improve TFPG.Originality/valueBy providing many empirical evidences to solve the aforesaid TFPG controversy, this paper, therefore, enriches the body of knowledge on growth theories, especially at the level of industrial economics.

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“…At the construction industry level, using a trans log production function and the Kumbhakar et al (2000) decomposition method, Wang et al (2021) found that TI and AEI have a significant positive impact in China, while TEI has contribute to an adverse effect. However, a previous result by Chancellor andLu (2016) using FPI andthe O'Donnell (2012) decomposition method indicates that China's construction industry is mainly driven by scale efficiency instead of TI.…”

“…At the construction industry level, using a trans log production function and the Kumbhakar et al. (2000) decomposition method, Wang et al. (2021) found that TI and AEI have a significant positive impact in China, while TEI has contribute to an adverse effect.…”