Firm-Level TFP Growth in the Chinese Automobile Industry

Abstract

China has been the world's largest automobile producer since 2009, but it still lags behind other countries in terms of productivity. Based on the National Bureau of Statistics of China (NBSC) firm-level data and the improved approach proposed by Ackerberg et al. (2015), this paper investigates the contribution of total factor productivity (TFP) growth to the Chinese automobile industry and evaluates the impact of firm entry and exit on TFP growth. The empirical results show that the TFP of the Chinese automobile industry grows at 10.7% per year. Joint venture and foreign-owned firms have a significantly higher TFP growth rate than others. Large-scale firms have a higher TFP growth rate than do small-scale firms, but the latter have caught up after 2004. Moreover, the entry of new firms and exit of old firms significantly improve the aggregate TFP growth rate.