CHEN Xilu

CHEN Xilu

Assistant Professor in School of Economics at Jinan University

Working Papers

The Effects of Sectoral TFP on China’s Structural Transformation and Growth

Abstract: Since the 21st century, China has followed the Kuznets patterns of structural transformation across broad sectors while simultaneously witnessing the transformation and upgrading of traditional industries within broad sectors. Intra-sectoral analysis reveals distinct patterns for high-technology manufacturing and nontraditional service relative to their traditional counterparts in total factor productivity (TFP) improvement, capital deepening, value added growth, and employment dynamics. Notably, intra-sectoral disparities in these dimensions even exceed inter-sectoral differences. While heterogeneous TFP improvement across sectors is acknowledged as a crucial force in structural transformation, its dual role in simultaneously shaping inter- and intra-sectoral structural transformation remains underexplored, further complicating efforts to quantify the differential contributions of sectoral TFP to economic growth. To address this concern, we develop a multi-sector dynamic general equilibrium model that integrates structural transformation across and within sectors. We find that between 2003 and 2020, TFP growth in high-technology manufacturing and traditional services served as the main engines of China’s structural transformation and economic growth. Within the secondary sector, TFP gains in high-technology manufacturing increased its value-added share by 8.37 percentage points and employment share by 8.78 percentage points, concurrently raising annualized aggregate labor productivity growth by 1.95 percentage points. In comparison, TFP improvement in traditional services led to an increase in the value added shares and employment shares of nontraditional services within the tertiary sector by 11.71 and 9.09 percentage points, respectively, while contributing 1.61 percentage points to the annualized labor productivity growth rate. Although TFP growth currently exerts a marginally weaker influence than capital deepening, China’s future structural transformation and economic growth will depend more heavily on TFP improvements given the declining investment rates. Prioritizing TFP improvements in high-technology manufacturing and harnessing untapped TFP potential in nontraditional services could be possible breakthrough directions for sustaining high-quality development.

A Quantitative Assessment of Resource Allocation Efficiency in China: 2003–2022

Abstract: China’s productivity growth has slowed over the past 15 years, a period during which structural transformation has accelerated. The varying pace and nature of this shift across provinces raise questions of how resource allocation—both sectoral and regional— shapes aggregate productivity dynamics. To explore this issue, this paper first compiles a province-sector dataset spanning 2003–22, based on official statistics with key adjustments to ensure internal consistency. We then apply the standard accounting framework to estimate marginal products for each province-sector. Our findings reveal a substantial decline in the dispersion of marginal products across provinces and sectors, indicating improved resource allocation efficiency. Significant declines are also observed in the within-province dispersion of marginal products across sectors and the cross-province dispersion of marginal products in services, whereas the secondary industry exhibits the opposite trend. Finally, we construct a model incorporating non-homothetic preferences, CES aggregators of sectoral inputs, and inter-regional trade to quantitatively evaluate the implications of these changes for resource allocation efficiency. Changes in the dispersion of marginal products have played a significant role in driving aggregate TFP growth in the past. Addressing current allocation inefficiencies holds the potential to substantially enhance aggregate TFP growth in the future.