Sources of investment inefficiency: The case of fixed-asset investment in China |
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Authors: | Duo Qin Haiyan Song |
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Affiliation: | 1. Department of Economics, Queen Mary, University of London, UK;2. Public Policy Research Institute, The Hong Kong Polytechnic University, Hong Kong |
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Abstract: | This study attempts to measure the inefficiency associated with aggregate investment in a transitional economy. The inefficiency is decomposed into allocative and technical inefficiency based on standard production theory. Allocative inefficiency is measured by the deviation of actual investment from the theoretically desired investment demand. Institutional factors are then identified as part of the driving force of the deviation. The resulting model is applied to Chinese provincial panel data. The main findings are: Chinese investment demand is strongly receptive to expansionary fiscal policies and inter-provincial network effects; the tendency of over-investment remains, even with signs of increasing allocative efficiency and improving technical efficiency. |
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Keywords: | E22 E62 H74 P3 C23 |
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