This article estimates firm-level factor-augmenting productivities for capital, labor, and materials in Chinese manufacturing from 1998 to 2008 and asks whether the state-owned enterprise (SOE) privatization reshaped them. Allowing each productivity to follow an endogenous, ownership-dependent process, I find technological change strongly biased toward capital and labor. Private firms operate at higher capital- and labor-augmenting productivity than SOEs, but lower material-augmenting productivity. Privatization itself raises labor-augmenting productivity in the early years after the transition, a front-loaded gain that fades on the full panel but is large and persistent among the 1998 cohort of incumbents; it leaves capital-augmenting productivity no higher, modestly reduces material-augmenting productivity, and is associated with higher markups. Both the productivity growth and the privatization effects vary markedly across industries. A decomposition shows that the SOE sector's catch-up runs through the restructuring of the plants the state kept and, for labor, the exit of overstaffed ones.

Abstract coming soon.

This paper examines how ownership transformation during China’s state-owned enterprise (SOE) reform affected the direction of firm-level technological change. Using Chinese manufacturing data from 1998–2008, I estimate a nested CES production function with factor-augmenting productivities and embed privatization directly into the law of motion for each productivity to address endogenous ownership change. I also relax perfect-competition assumptions in labor markets by allowing ownership-specific rent sharing, which separates true labor-augmenting technological change from wage markdowns. Using the estimates, we quantify how privatization shifts labor-augmenting productivity and compare labor market power between SOEs and private firms.