Journal
ENERGY ECONOMICS
Volume 69, Issue -, Pages 270-279Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.eneco.2017.11.021
Keywords
Factor market distortion; Resource misallocation; Total factor productivity; Price elasticity of factor demands; Heavy industry sector
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Funding
- Natural Science Foundation of China [71774122, 71503094, 71673230, 71303177]
- Major Program of the National Social Science Foundation of China [16ZDA006, 16ZDA039]
- Fundamental Research Funds for the Central Universities [2017QN035]
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In this study, we develop a novel analysis framework for evaluating the effects of resource reallocation from the correction of factor market distortion (FMD) on total factor productivity (TFP) gains. We first measure FMD in China's heavy industry sector from 1995 to 2012, and then investigate the effects of resource reallocation from FMD correction by using the price elasticity of factor demands as a link, along with its potential TFP gains. The results indicate that: (1) Taking the price of capital as a reference, the prices of labour and energy in the study period were relatively higher to different extents. (2) If current FMD were fully corrected, the labour input in China's heavy industry sector would increase by 25.37%, whereas capital and energy inputs would decrease by 18.51% and 10.57%, respectively. (3) The resource reallocation effects resulting from current FMD correction will bring about significant TFP improvement (by 8.55%) in China's heavy industry sector, and there are evident industrial differences and stage characteristics for these promoting effects. (C) 2017 Elsevier B.V. All rights reserved.
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