Aggregate Demand, Productivity, and “Disguised Unemployment” in the Chinese Industrial Sector
Author(s)
Li, Minqi
Abstract
Many economists argue that the Chinese state and collectively owned enterprises are fundamentally inefficient and better economic performance requires large-scale layoff of the state and the collective sector workers. This paper argues that the productivity of state and collectively owned enterprises depends on the level of aggregated demand. If the government undertakes expansionary policies and raises the level of aggregate demand, a substantial part of the disguised unemployment can be eliminated. In the long run, for the demand expansion to be sustained, it is necessary to improve income and wealth distribution and promote the general development of political, social, and economic democracy.
