Productivity Evolution of Chinese Large and Small Firms in the Era of Globalisation

Using a large firm-level dataset from the Chinese manufacturing industry, this paper studies the productivity gap and productivity convergence between large and small firms in China. We find that small firms are less productive relative to large firms, but the productivity gap became smaller over the sample period 1999–2007. Based on static and dynamic Blinder-Oaxaca decompositions, we distinguish the endowment effect from the return effect, and quantify the impacts of exports and FDI on the productivity gap and productivity convergence.