IMPACT OF CENTRAL PLANNING ON PRODUCTION EFFICIENCY - THE CASE OF THE COTTON YARN INDUSTRY IN CHINA

This study measures the impact of central planning in China on the efficiency of cotton yarn production. First, an analysis of plant panel data for the period 1922-1936 studies the cotton yarn technology. This technology is found to be Cobb-Douglas with constant returns and with a labor parameter of 0.45. Second, this information is used to analyze industry time-series data from 1922 to 1986. This analysis finds that the absence of trade from 1949 to 1978 caused major drops in output when cotton crops failed. In addition, central planning is responsible for a 21% decline in total factor productivity. In contrast, the 1978 reform does not show by the end of our sample a major impact on the total factor productivity of this industry. J. Comp. Econom., March 1993, 17(1), pp. 23-42. Stanford University, Stanford, California 94305. © 1993 by Academic Press, Inc.