Manufacturing growth and labour misallocation from the perspective of industry linkages: evidence from China

This study investigates the impact of labour misallocation on economic growth in China’s manufacturing sector from the perspective of industry linkages and analyzes the role of these linkages in this relationship. Utilizing data from various Chinese industries and the input-output table, the findings are as follows: First, neglecting industry linkages results in an overestimation of the negative impact of labour misallocation on manufacturing growth. Second, manufacturing subsectors partially mitigate the impact of misallocation by adjusting the input structure of intermediate products. Third, there is heterogeneity among the subsectors in their ability to offset the negative impact of labour misallocation. This study corrects the overestimation of the negative effects of labour misallocation in the existing literature, deepening our understanding of the market’s role in the allocation of production factors. The study provides theoretical insights and practical references for the economic development and industrial transformation of manufacturing-led countries, emphasizing the significance of industry linkages in analysis and application, and offering a basis for formulating differentiated industrial factor allocation policies.