Factor Misallocation and Optimization in China’s Manufacturing Industry

Factor allocation has an important impact on production efficiency, and this study discusses factor misallocation proposes optimized method that could improve efficiency reduce inputs. Under a multi-industry competitive equilibrium model, by introducing distortion tax represents frictions inputs (capital, labor, energy, other intermediate consumption), we define price indexes to measure set the standardized comprehensive index at optimal value of one obtain each factor. Using actual inputs, compute input-oriented efficiencies separately employing slack-based measurement data envelopment analysis (SBM-DEA). The superiority new is tested comparing changes in input redundancy before after optimization. An empirical test based China’s manufacturing sector during 1999–2016 shows that, under reallocation, average, improved 43.40%, capital, consumption are reduced 18.06%, 16.34%, 30.91%, 31.24%, respectively, total carbon emission 55.22% from 2000 2016. Our results imply causes losses excessive factors, needs be further for sustainable development.