The rapid economic development in China has been characterized by levels of income and productivity very heterogeneous across local areas. This work investigates a previously unexplored aspect of such heterogeneity by assessing the degree of withinindustry allocative eciency across provinces in China over the period 1998-2007. Using firm-level data from the surveys conducted by the National Bureau of Statistics on the Chinese manufacturing firms, we measure the degree of resource misallocation by computing the within-industry covariance between size and productivity at the provincial level. The results suggest that within-industry allocative eciency varies considerably across local areas and that some place-based factors strongly influence resources mobility. Our work sheds some light on the mechanisms at play in the distribution of resources in China and it contributes to the literature investigating the degree of allocative eciency.

JEL codes: D24; L25; O47 F41.

Keywords: Allocative eciency; Resource allocation; Regional disparities; China.

(Published International Review of Economics and Finance , 57, 103-113: https://doi.org/10.1016/j.iref.2018.02.015)