Determinants of China's labour productivity and their implications.

• Main Authors: Lin, Yuan Lei., Mohamed Najib Abdul Halim., Nguyen, Phuong Thanh.
• Other Authors: Chew Seow Lung, Rosalind
• Format: Final Year Project
• Language: English
• Published: 2011
• Subjects: DRNTU::Social sciences::Economic development
• Online Access: http://hdl.handle.net/10356/44318
• Institution: Nanyang Technological University

China has been experiencing remarkable economic growth over the last three decades. This outstanding economic achievement can be partially attributed to its tremendous productivity growth. This paper aims to identify and evaluate the most important factors that contribute to China’s labour productivity during its reform period, from 1980 to 2005. Our study finds that gross capital formation, government spending on education and union membership have positive and significant impacts on China’s productivity. According to our estimation, union membership has the highest coefficient of 0.3779. This might be a result of the SOE reform policies implemented in the 1980s. The coefficient of net FDI inflow, on the other hand, is found to be negative. Various reasons have been put forth for this observation, including the low absorptive capacity of the Chinese firms and the inter-regional trade barriers. The findings on union membership and net FDI inflow are the most significant contributions that our paper makes to the literature. Based on our results, we discuss the policy implications that the Chinese Government needs to consider in order to improve labour productivity growth. It should be noted that improvement in labour productivity cannot be achieved simply by working on one specific factor. To encourage productivity growth, the pros and cons of each policy should be thoroughly evaluated, and complementary channels should be used to substantiate each other.