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Impact of Zombie Firms on China’s Aggregate TFP Dynamics
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TitleImpact of Zombie Firms on China’s Aggregate TFP Dynamics  
AuthorLi Xuchao and Shen Guangjun  
OrganizationZhejiang University;Central University of Finance and Economics; 
Key WordsZombie firms; TFP; Reallocation; Entry and Exit 
AbstractCharacteristics of Zombie firms in China and their impact on aggregate TFP are studied in this paper. China has more zombie firms weighted by assets and liabilities in 2011-2013 than in 2008-2009, while almost the same zombie firms when evenly weighted. Most zombie firms are non-state-owned since 2005, and are distributed in over-capacity industries. Such zombie firms hinder China’s TFP growth. A 1% increase in zombie asset results in a 0.162% decrease in TFP growth rate. According to the dynamic OP TFP decomposition method proposed by Melitz & Polanec (2015), Zombie firms impose negative effect on technology progress and resource reallocation, while positive effect on firm entry and no significant effect on firm exit. 
Serial NumberWP1187 
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