Total Factor Productivity Growth and its Spatial Disparity across China's Township and Village Enterprises

What lies behind China's recent economic prosperity is the unexpected success and development of her township and village enterprises (TVEs). The proportion of China's total industrial output produced by the TVEs increased from 9 to 42% between 1978 and 1994. The incredible development of the TVEs, along with the declining in importance of the SOEs in recent years, undoubtedly suggests that the TVEs are the engine of growth of the Chinese economy, and their continuous success will have a tremendous impact on the economic development of China in and beyond the twenty-first century. What remains questionable, however, is whether or not this rapid development of the TVEs is at the same time exacerbating China's spatial disparity by encouraging inequality in productivity and production efficiency of these enterprises across different provinces. This study aims to answer this question by examining the changes in total factor productivity (TFP) of TVEs located in different provinces between 1988 and 1993 with particular reference to the corresponding spatial disparities of these changes. The Malmquist output based productivity index, which allows for the decomposition of productivity growth into changes in technical efficiency over time and shifts in technology over time, is the technique adopted here.