Introduction

Fifty years ago economists such as Abramovitz (1956), Kendrick (1956) and Solow (1957) created the concept of ‘residual’ to account for output growth unexplained by the changes in inputs. This residual is now popularly known as total factor productivity (TFP) growth or the rate of technological progress. It is shown to be responsible for a large proportion of economic growth in developed economies according to empirical studies (Dougherty and Jorgenson, 1996). As the supply of conventional inputs, namely capital and labour, is limited, long-term economic growth relies on the size of the ‘residual’ which in theory is unlimited. Thus, whether an economy can sustain its growth in the long run depends on productivity changes. This relationship has led to the recent resurgence of interest in productivity and growth analysis in the literature.1 This book adds to the literature. Its objective is to examine several important issues associated with the relationship between productivity, efficiency and economic growth in the Chinese economy. In this introductory chapter, a brief review of the literature is presented first (Section 1.1). This is then followed by an outline of the core chapters (Section 1.2).