Firm Heterogeneity, Biased Technical Change, and Total Factor Productivity : Evidence from China

This paper measures total factor productivity and decomposes it into biased technical change and technical efficiency by using the data of Chinese industrial firms. We suggest an alternative production function to generate consistent estimates. We find that the capital-augmenting and labor-augmenting technologies increase faster than the material-augmenting one, which means the technical change is biased to the material because factors are gross complements. The TFP and the growth rates of three factor-augmenting technologies vary across periods, regions, industries, firm sizes, and ownerships. And the total factor productivity is not driven by biased technical change but mainly by technical efficiency