Abstract
This paper presents an approach for modeling and estimating potential sources of productivity growth within four major sectors of Chinese industry—the state and collective sectors and heavy and light industry. The findings, based upon industrial data from293 Chinese counties, indicate that substantial productivity gains can be achieved by transferring technology from the state to the collective sector, exploiting enterprise and agglomerative scale economies, and reallocating investment and labor to take advantage of large disparities between factor returns among the sectors. The implications for the results of several idiosyncracies of Chinese industrial prices and data are examined.