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Abstract  Many economists, represented by North, have argued that institutions are the most fundamental causes of economic growth. From the view of firm, economic growth results from two sources: one is intra-firm productivity growth which is obtained from technology progress, and the other one is the efficiency improvement of inter-firm resource allocation. Chinas economic transition process from a planned economy to a market economy is a large-scale and discontinuous institutional change. Using China Industrial Enterprises Database, this paper investigates the impacts of institutions on micro productivity of firms and inter-firm resource allocation efficiency. The results are: (1) through the improvement of incentives, institutions can boost intra-firm resource allocation, thus improve firms productivity; (2) institutions can improve the efficiency of intra-firm resource allocation and promote the flow of input factors to high-productivity firms, thus reducing resource misallocation.

Key words： Institutions      Institutional Change      Firm Productivity      Resource Misallocation

Source: Finance & Trade Economics , No.8, 2014