Allocation of resources within subgroups of an industry: a case study in the Chinese industrial sector

  • Chun-kei TsangEmail author
  • Sung-ko Li


Facing bottlenecks of economic growth, two important policy concerns of the Chinese government are the regional fragmentation and ownership distortion. This paper extends the method of measuring structural efficiency of a group of firms to the existence of subgroups of firms to evaluate such issue. Without knowing the “true” prices, we argue that there is an output-oriented solution to the economy. We then apply this new method to the Chinese industrial sector from 2005 to 2014 as a case study. We found that resources were allocated efficiently among different regions but not within regions. In contrast, resources were allocated efficiently within different ownerships but not among ownerships. Specifically, by eliminating inefficient resource allocation among different ownerships, outputs of the whole industrial sector could be increased by 21% of the observed levels. These two findings cannot be derived directly from other existing methods. Our results advocate different directions to conduct further regional and ownership reforms in China.


Chinese industrial sector Revenue structural efficiency Output-oriented structural efficiency Western development strategy Ownership reform 

JEL Classification

C11 L60 P21 


Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflicts of interest.


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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsHong Kong Baptist UniversityHong KongHong Kong
  2. 2.Business, Economic and Public Policy Research CentreHong Kong Shue Yan UniversityHong KongHong Kong

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