Productivity Growth in China Before and After 1978 Revisited

This paper analyses total factor productivity growth in China, and discusses the evidence regarding whether or not it increased after the implementation of market reforms in 1978. The paper addresses to two major issues. The first considers the case when technical progress in China was biased in a labour-saving direction and the elasticity of substitution was substantially less than unity. Secondly, it is shown that the notion of total factor productivity growth used in most analyses is problematic and misleading since it is based on the concept of aggregate production function. It is shown that the aggregate production function is subject to insurmountable problems that limit its usefulness for empirical exercises.