Estimation and Decomposition of China’s Provincial Total Factor Productivity: Based on DEA Malmquist Index Method

Abstract

Total factor productivity is thought to be the key factor to economic development, while related empirical studies on China’s total factor productivity estimation is limited. This paper using a Malmquist index model, estimated China’s provincial total factor productivity during 2009-2015, and decomposed total factor productivity into technological progress, technological efficiency and scale efficiency to study its affecting factors. The main results show that China’s total factor productivity has a limited contribution to economic development compared with before and total factor productivity in China has been declining since 2011.We also found the growth rate of China’s total factor productivity in less developed areas was greater than that of more developed areas, in which technological progress contributed most. However, further analysis shows that although China’s past TFP growth depend on technological progress, its effect is fading. We believe this paper have important policy implications that China should pay more attention to improving TFP through promoting efficiency, and China should also further improve self-innovation to promote technological progress growth.

Keywords: economic growth, malmquist index model, total factor productivity