Ownership and Productivity in Vertically-Integrated Firms: Evidence from the Chinese Steel Industry

Ownership and Productivity in Vertically-Integrated Firms: Evidence from the Chinese Steel Industry

The Review of Economics and Statistics

Loren Brandt, Feitao Jiang, Yao Luo, and Yingjun Su

Abstract

We study productivity differences in vertically-integrated steel facilities using equipment-level information on inputs and output for each of the main stages in the value chain. We obtain stage-level productivity estimates by estimating a multi-stage production system and then integrate them into estimates for integrated facilities. At this level, we do not find statistically significant differences in productivity by ownership. This conceals important differences upstream and downstream in the value chain: Private firms outperform in pig-iron and steelmaking, but lag in sintering. Inferior access to higher quality raw materials and use of less automated technology are likely sources of these differences.

Keywords: Total Factor Productivity, Vertically-Integrated, Steel, SOEs, Private, China

JEL classification: D24; L11; L23; L61