State fixed investment and non-state sector growth in China

摘要

This paper is an empirical attempt to (ⅰ) identify whether state fixed capital is a complement or a substitute to non-state sector inputs, and to (ⅱ) quantify the marginal contribution of state fixed capital to non-state sector industrial output at both the national and provincial level in China during the 1978-2000 period. The main result, based on impulse responses derived from vector auto-regression models, indicates that state fixed capital formation complements non-state sector inputs and positively affects industrial output at both the national and provincial level. The results support the central and provincial governments' policy of sustained state fixed capital formation.