Structural Change, Performance and Demand on Resources
Edited by Ligang Song and Haimin Liu
Chapter 6: The backward and forward linkages of the iron and steel industry in China and their implications
Yu Sheng and Ligang Song
A unique feature of the iron and steel industry is that it has some close relationships both upstream and downstream, in that the rapid expansion of the industry may influence the performance of both the upstream and downstream industries, possibly through cross-industry productivity spillover. Capturing this spillover effect is the subject of this chapter. Following the recent literature analysing firm-level productivity (Javorcik, 2004), the chapter examines the cross-industry productivity spillover of the iron and steel industry using firm-level data in the Chinese manufacturing sector over the period 2000–03. After controlling for the potential endogeneity problem, we find that increases in the average productivity of firms in the iron and steel industry may promote firms’ productivity downstream but might not be conducive to firms’ productivity upstream. When firms’ heterogeneity in operation size and productivity are considered, the results show that medium and small firms with low productivity downstream are likely to benefit more from the productivity growth of the Chinese iron and steel industry.
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