The Impact of Total Factor Productivity on Economic Growth Based on Chinese Economy

Abstract

Total factor productivity (TFP) refers to the level of efficiency in using production factors. These factors include labor and capital and are used to gauge the productivity of an economy. However, economists believe that other factors contribute to the growth of the economy as well. These factors, which originate from TFP, have been presented in China for the past two decades. In this regard, the current study aimed to investigate the contribution of TFP to the Chinese economy. More precisely, it focused on accomplishing other recent studies on this area and demonstrating the misallocation of resources on TFP limitations influenced on Chinese economy. The designation of resources in the country has been noted to alter the TFP level. Similarly, a reduction in the government regulation of industries plays a role in increasing TFP in the Chinese economy. The findings of this study indicated that the growth of the Chinese economy in the past was highly driven by the capital with a limited emphasis on labor and technological investments. Finally, the results suggested that the country should further invest in technology and labor force skill acquisition in order to enhance TFP.

Keywords

• Total factor productivity
• China
• Economic growth
• Labor

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