Sources of Chinese labor productivity growth : A structural decomposition 2 analysis , 1987 – 2005 3

10 Article history: 11 Received 29 June 2009 12 Received in revised form 24 May 2010 13 Accepted 25 May 2010 14 Available online xxxx 5 We decompose labor productivity growth from 1987 to 2005 by examining six partial factors 16 (both supply and demand): changes in value-added coefficients, labor inputs, shares of sectoral 17 demands that are fulfilled domestically, input mix, and the intra-sectoral shares and 18 intersectoral mix of final demand. Our analysis confirms that simply by virtue of its size and 19 extremely low level of labor productivity, China's farm sector continues to weigh heavily in 20 China's overall economic advances. Labor savings have levied the largest influence on the labor 21 productivity on all sectors across all three study subperiods. We find that this transition is 22 highly correlated with capital deepening that accompanies China's opening up process. Still, 23 changes in the intra-sectoral shares and the intersectoral mix of China's final demand also have 24 become quite strong, especially in recent periods. Due to ever-increasing competitive pressures 25 as China continues to open, changes in industries value-added coefficients have tended to 26 counteract some of the positive benefits of labor savings for most sectors. The effects on 27 changes in labor productivity of technology change and changes in the use of imports have 28 been comparatively negligible and any variation in their sectoral effects waning over time Q2 . 29 © 2010 Published by Elsevier Inc. 30 JEL classification: 31 C67 32 F47 33 O11 34 O53 35 36