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Title: Sources of investment inefficiency : the case of fixed-asset investment in China
Authors: Qin, Duo
Song, Haiyan
Subjects: Over-investment
Soft-budget constraint
Issue Date: Sep-2009
Publisher: Elsevier
Source: Journal of development economics, Sept. 2009, v. 90, no. 1, p. 94-105.
Abstract: This study attempts to measure the inefficiency associated with aggregate investment in a transitional economy. The inefficiency is decomposed into allocative and technical inefficiency based on standard production theory. Allocative inefficiency is measured by the deviation of actual investment from the theoretically desired investment demand. Institutional factors are then identified as part of the driving force of the deviation. The resulting model is applied to Chinese provincial panel data. The main findings are: Chinese investment demand is strongly receptive to expansionary fiscal policies and inter-provincial network effects; the tendency of over-investment remains, even with signs of increasing allocative efficiency and improving technical efficiency.
Rights: Journal of Development Economics © 2009 Elsevier. The journal web site is located at
Type: Journal/Magazine Article
DOI: 10.1016/j.jdeveco.2008.06.001
ISSN: 0304-3878
Appears in Collections:PPRI Journal/Magazine Articles

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