Gong Liutang and Xie Danyang

This paper examines the efficiency in resource allocation in China. We estimate production functions at the provincial level and use these functions to compute time series for marginal products of capital and labor. We found that dispersion in the marginal product of capital declined from1970 to 1984 and then became stable afterward, whereas the dispersion in the marginal product of labor declined initially but the trend has been reversed since 1993.We argue that this reversal may indicate any of the following: (1) policy-driven labor migration adding to labor market inefficiency; (2) the presence of increasing returns in labor; and (3) both capital and labor having become mobile since 1993

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Danyang Xie and Kun Cheng

Abstract

Globalization has promoted the growth of the global economy and has greatly enhanced the liquidity of capital; the more efficient combination of capital and labor has increased labor productivity in developing countries. The rise of developing countries has also had a serious impact on the middle and lower classes of Western developed countries, exacerbating the problem of inequality within them. As long as globalization can make the world economy more prosperous, people may be able to solve the distribution problem by promoting inclusive growth, of which the key points are platform construction, open development, and preactive transformation.