Regional Disparity of Productivity in China: A Stochastic Frontier Approach

We attempt to use a group-specific stochastic frontier method to analyze temporal change in the regional productivity performance of China. This method allows us to separate China into three different regional groups, namely the eastern, central, and western, each of which can have its own temporal movement of inefficiency. Our estimation indicates that Shanghai is the most efficient economy in China. In additional, all three regional groups have been able to close the gaps on Shanghai and the rate of catching up is most notable in the western region. Finally, we compared the productivity performance of the three most advanced provinces, Guangdong, Zhejiang, and Jiangsu, with Shanghai. The result of this estimation shows that Zhejiang and Jiangsu have been able to narrow their gaps with Shanghai, while Guangdong has failed to do so.