TFP growth of listed firms in Japan, China and Korea and an international comparison of their TFP levels

Transcription

1 A Comparison of the Productivity of Japanese, Chinese and Korean Firms March, 7 Japan Center for Economic Research (JCER) Fumihide Takeuchi Shigesaburo Kabe Deiqiang Liu(Tokyo Gakugei University) Keiko Ito (Sensyu University) Center for Economic Institutions (CEI), Institute of Economic Research (IER), Hitotsubashi University Kyoji Fukao Tangjun Yuan Young Gak Kim Center for China and Asian Studies (CCAS), Nihon University Tomohiko Inui Hyeog Ug Kwon Seoul National University Keun Lee Moosup Jung TFP growth of listed firms in Japan, China and Korea and an international comparison of their TFP levels Kyoji Fukao (Hitotsubashi University) Tomohiko Inui (Nihon University) Tangjun Yuan (Hitotsubashi University) Hyeog Ug Kwon (Nihon University) Young Gak Kim (Hitotsubashi University) Moosup Jung (Seoul National University)

2 Background Japanese companies in the manufacturing sector have been facing competition as a result of the appearance of internationally competitive firms from Korea such as Samsung Electronics and Hyundai Motor Company, and by the development of firms in China, especially foreign affiliated companies. Research Purpose There is great interest in the question as to what type of firm can survive under further trade liberation, especially that taking place as a result of FTA negotiations between Japan and South Korea and China s accession to the WTO. In this study, using financial data for listed companies, we compare firms productivity, including total factor productivity, in these three countries in recent years.

3 Total Factor Productivity (TFP) We calculate each firm s TFP by following the method of Good, Nadiri and Sickles (7), taking the year as the base time period. n ln TFPf, t= (ln Qf, t ln Qt) ( S f, i, t+ Si, t)(ln X f, i, t ln X, ) i= i t t t n + (ln Q ln s Qs ) ( S is, Sis, )(ln Xis, ln Xis, ), s = s= + i= where TFP : TFP at firm f in period t, Q S f, t f,, i t f, t : The output at firm f in period t, : Thecost share of input i at firm f in period t. Relative Output Prices () We need to convert output and inputs by firms in each country to a common currency with a currency conversion factor which takes account of cross-country differences in relative price levels. In this study, we use estimation results of relative output prices from RIETI s ICPA project as the currency conversion factor.

4 Relative Output Prices () The relative output price (ROP) estimation by industry from RIETI s ICPA project is available only for the year 7. Since our base year is, we estimate the industrial relative output price in using the following equation: ROP where p + ln p ln p i i ij = ij x, x,7 x, ROP x,7 + j j ln p x, ln px,7 j xy, is the price index of industry x in a country j in year y Relative Intermediate Prices Relative intermediate prices are calculated as the simple average of the relative energy and material prices estimated by RIETI s ICPA project. Issues The information from IO table should be used when we estimate relative intermediate price from relative energy and material prices. For productivity analysis, a more appropriate concept of intermediate price would be purchase price rather than producer price. The prices for domestic inputs and imported inputs are not treated separately.

5 Relative Capital Asset Prices Relative capital asset prices by type are estimated by using information on relative output prices: Structure: relative output price of construction Machinery: the arithmetic average of relative output prices of machinery, electrical machinery and precision machinery. Vehicles: the arithmetic average of relative output prices of motor vehicles and transport machinery. Relative TFP Levels () Based on all the relative output and input prices described in the previous slides, the relative TFP levels of Japanese, Korean and Chinese firms are estimated using the equation in the next slide.

6 Relative TFP Levels () n ln TFPf, jct,, = (ln Qf, jct,, ln Qjct,,) ( S f, jcit,,, + S jcit,,,)(ln X f, jcit,,, ln X,,,) i= jcit t t n + (ln Q j, c, s ln Qj, c, s ) ( S j, c, i, s Sj, c, i, s )(ln X j, c, i, s ln X j, c, i, s ) ln μc, Japan,, s= s= + i= + where TFP : TFP at firm f belonging to industry j in country c at time t, Q S f, jt, f, j, c, t f, j, c, i, t : The output at firm f belonging to industry j in country c at time t, c, japan : The cost share of input i at firm f belonging to industry j in contry c at time t, ln μ : '., Country c s relative TFP level in industry i to that in Japan in Bilateral Index of Multifactor Productivity () We calculate the bilateral index of multifactor productivity of countries A and B (lnμ AB ) in industry i by following the method used by Schreyer (): ln μ = lnθ v lnθ + v lnθ + v lnθ AB AB AB AB AB AB AB AB it, Qit,, K, it, K, it, Lit,, Lit,, M, it, M, it,

7 Bilateral Index of Multifactor Productivity () Where, AB, ( A B,, ), j vix = vix+ vix and ν ix, indicates country j ' s arithematic mean cost share of input x in industry i, A B ( Q Q i, t ) ( q q ) ln θ = ln ln ln ln AB A B Q, i, t i, t Q, i, t Q, i, t ln Q indicates the natural log of the geometric average quantity j it, for output across all firms in industry i in country j at time t j qqit,, indicates the absolute output price of industry i in country j at time t Bilateral Index of Multifactor Productivity () A B ( ) ( ) N AB AB A B Kit,, = wist,, Kist,, Kist,, qist,, qist,, s lnθ ln ln ln ln j ln Kist,, indicates the natural log of the geometric average quantity for capital asset type s across all firms in industry i in country jat time t AB,, ( A B,,,, ), j wist = wist+ wist where wist,, indicates the arithematic average cost share of capital asset type s in total costs for all types of capital assets across all firms in industry i in country j at time t. q j ist,, indicates the absolute capital asset type s price of industriy i in country j at time t

8 Bilateral Index of Multifactor Productivity () AB A B L,, it LHit, LHit, lnθ = ln ln j ln LHit, indicates the natural log of the geometric average quantity for labor input across all firms in industry i in country jin time t A B ( M M ) ( q q ) lnθ = ln ln ln ln AB A B M,, it it, it, M,, it M,, it j ln M it, indicates the natural log of the geometric average quantity for intermediate input across all firms in industry i in country jat time t q j Mit,, indicates the absolute intermediate price of industriy i in country j The Characteristics of listed firms in Japan, Korea and China

9 Major Stock markets of Japan, Korea and China() Japan Korea China (Tokyo Stock Exchange) (Korea Stock Exchange) (Shanghai Stock Exchange) No.of Listed companies 7 8 Market value (trillion US$).7.8. of Establishment Types of Stock Markets Japan Korea China Main Board Tokyo/Osaka/ Nagoya/ Fukuoka / Sapporo/ Stock Exchange Korea Stock Exchange Shanghai/ Shenzhen Stock Exchange Market for Emerging Companies (No.of Listed companies, Market value =trillion US$) Jasdaq (7,.) Mothers (TSE: 8,.) Hercules (OSE;,.) Kosdaq (,.8) SME board (Shenzhen:,.)

10 Notes for Number of Companies by Stock Market Japan A company listed in a certain stock market in is treated as the listed company in this market in the previous years. Korea A company listed in a certain stock market in a certain year is treated as the listed company in this market in the previous years. But once the company is delisted in a certain year, then the company is not included in our sample, afterwards. China Actual number of listed companies in each stock market in each year. Number of Firms by Stock Market (Japan) 8 First section,,87,,8,8 Second section Jasdaq 7 8 OTC 8 Total,78,,87,,

11 Number of Firms by Stock Market (Korea) Market 8 KSE 8 KOSDAQ 8 sum 87,,7, Number of Firms by Stock Market (China) Market Shanghai Shenzhen 7 Total 7 8

12 Number of Firms by Industry ( Japan, Manufacturing Industry) Industry Industry Name 8 Food and kindred products Textile mill products 8 Apparel 8 Lumber and wood 8 Furniture and fixtures 7 Paper and allied Printing publishing and allied 7 Chemicals 8 Petroleum and coal products Leather Stone clay glass Primary metal Fabricated metal 7 Machinery non-elect 78 Electrical machinery 7 8 Motor Vehicles 8 Transportation equipment and ordnance 8 Instruments 8 Rubber and misc plastics Misc manufacturing 8 Total,,,,7,8 Number of Firms by Industry (Japan, Non Manufacturing Industry) Industry Industry Name 8 Agriculture Coal mining Metal and nonmetallic mining Oil and gas extraction Construction 7 7 Transportation 7 Communication 8 8 Electrical utilities Gas utilities Trade 8 7 Finance Insurance and Real Estate Other private services 7 Public service Total 8,,7,8

13 Number of Firms by Industry (Korea, Manufacturing Industry) Industry Industry Name 8 Food and kindred products Textile mill products Apparel 8 8 Lumber and wood Furniture and fixtures Paper and allied Printing publishing and allied 7 7 Chemicals 7 7 Petroleum and coal products Leather Stone, clay and glass 8 7 Primary metal Fabricated metal 8 Machinery, non-elect 8 7 Electrical machinery 7 7 Motor Vehicles Transportation equipment and ordnance Instruments 8 7 Rubber and misc. plastics Misc. manufacturing 8 Total 78 87,7, Number of Firms by Industry (Korea, Non-manufacturing Industry) Industry Name 8 Agriculture Coal mining Metal and nonmetallic mining Oil and gas extraction Construction 8 Transportation 8 7 Communication 8 Electrical utilities Gas utilities Trade 7 Finance Insurance and Real Estate Other private services 7 7 Public service Total 78

14 Number of Firms by Industry (China, Manufacturing Industry) Food and kindred products 7 7 Textile mill products Apparel 8 Lumber and wood Furniture and fixtures Paper and allied 7 7 Printing, publishing and allied Chemicals 7 8 Petroleum and coal products Leather Stone, clay and glass Primary metal 7 8 Fabricated metal 8 Machinery, non-elect 8 7 Electrical machinery Motor vehicles Transportation equipment & ordnance 7 7 Instruments 7 8 Rubber and misc. plastics Misc. manufacturing 8 8 Total Number of Firms by Industry (China, Non-manufacturing Industry) Agriculture Coal mining 7 8 Metal and non-metallic mining Oil and gas extraction Construction 7 Transportation 8 7 Communication 8 8 Electric utilities 8 Gas utilities Trade Finance Insurance and Real Estate 7 7 Other private service Public service Total 7

15 Ratio between Total Sales of Listed Companies and GDP in Total sales/nominal GDP (%) Japan 8.% Korea.% China 8.% Value of Sales by Industry (Japan, Manufacturing Industry) (Nominal Value, Billion Yen) Industry Industry Name 8 Food and kindred products,7,7 7,87 8, 7, 7 Textile mill products,,7,87,7, 8 Apparel Lumber and wood Furniture and fixtures Paper and allied,,88,8,, Printing publishing and allied,7,,8,, Chemicals,,,87, 7, Petroleum and coal products,8,7,,8,7 Leather Stone, clay and glass,88,,,, 7 Primary metal, 8,8,,8,7 8 Fabricated metal,,,8,,7 Machinery, non-elect, 8, 8,8,, Electrical machinery 7,7 8,,8,, Motor Vehicles,7,87,,87 8, Transportation equipment and ordnance,7,,,,7 Instruments,,,,,87 Rubber and misc. plastics,8,,7,, Misc. manufacturing,,,7,7, Total,87 8, 8,8 88, 7,7

16 Value of Sales by Industry (Japan, Non-manufacturing Industry) (Nominal Value, Billion Yen) Industry Industry Name 8 Agriculture 7 Coal mining 77 Metal and nonmetallic mining 7 Oil and gas extraction 87 8 Construction 7,7,,,8, Transportation 8,,, 7,, 7 Communication,7, 7,8,7 7,78 8 Electrical utilities,7,,7,8, Gas utilities,,8,,8, Trade 8, 7,8 8,7,88,7 Finance Insurance and Real Estate,,7,7,, Other private services,, 7,7, 7,8 Public service Total 88,8,77,7,78,7 Value of Sales by Industry (Korea, Manufacturing Industry) (Nominal Value, Billion KRW) Industry Name 8 Food and kindred products,8 7,7,,7,88 7 Textile mill products,,7,,7,8 8 Apparel 7,,88,7, Lumber and wood 8 7 Furniture and fixtures 8 8 7,8 Paper and allied 7,8,,8,8 Printing publishing and allied Chemicals,88,,87 8,,8 Petroleum and coal products,77,,,8,8 Leather Stone, clay and glass,7,8,7 8, 7,77 7 Primary metal,77,,77,,7 8 Fabricated metal 7,,,, Machinery, non-elect,,,,8 Electrical machinery,7,,7,8,7 Motor Vehicles,,7,,, Transportation equipment and ordnance,7, 7,88,,8 Instruments 7 8,,8, Rubber and misc plastics 87,8,, 8, Misc. manufacturing 8 7, Total, 7,7,77,88,8

17 Value of Sales by Industry (Korea, Non-manufacturing Industry) Industry Name 8 (Nominal Value, Billion KRW) Agriculture 87 8,77 87 Coal mining Metal and nonmetallic mining 8 Oil and gas extraction Construction,7,8, 8,,7 Transportation,,,, 8,87 7 Communication,, 8,7,, 8 Electrical utilities,,, 8,, Gas utilities 7,8, 8, Trade,7,,7, 8, Finance Insurance and Real Estate Other private services,8 8,,8 Public service Total 7,7,,8, 8,7 Value of Sales by Industry (China, Manufacturing Industry) (Nominal Value, millions Yuan) Industry names Food and kindred products,,,7,7 7,8 87,7 7 Textile mill products,,,,8,, 8 Apparel,8,,,7, 8,8 Lumber and wood Furniture and fixtures 7 78 Paper and allied,,8 8,7,8, 7,77 Printing, publishing and allied,8,8,, Chemicals,8,87,7,7 77,,7 Petroleum and coal products 7,,,7 7,,8, Leather 78,,,8,7 Stone,clay,glass 8,7,,7,7,,87 7 Primary metal,8, 8, 8,8 8,87, 8 Fabricated metal 8,77,,,,,8 Machinery, non-elect,7 7, 7,,8,7,8 Electrical machinery 7,7 8,,8,,88,7 Motor vehicles,7,,7 7,,, Transportation equipment & ordnance,,8,8,78,7, Instruments,8,8,7,87,,8 Rubber and misc. plastics 8,,8, 7,88,, Misc. manufacturing,,,, 7,,7 Total,78,88 7,,,8,7,8,78

18 Value of Sales by Industry (China, Non-manufacturing Industry) (Nominal Value, millions Yuan) Industry Industry names Agriculture,8 8,,,,,8 Coal mining, 7,,8 7,8,7, Metal and non-metallic mining ,7 Oil and gas extraction,,, 7,,8, Construction, 8,8,7,, 7,7 Transportation,,,7,, 8,8 7 Communication 7,,,,7 7,7, 8 Electric utilities,,,,,7, Gas utilities,,8,8,,, Trade,7,,788,,8, Finance Insurance and Real Estate,,8,78 8,,,7 Other private service,8, 8,7,,7 8, Public service Total,8 78,7,8 7,,,88, Source of Data (Japan) Deflator - Output : JIP (Japan Industry Productivity ) Data base - Material : JIP Data base Labor Hour - Number of Employee : DBJ (Development Bank of Japan) Data base - Industry average labor hour : JIP Data for capital cost - Interest rate : Bank of Japan - Corporate tax rate : The Actual Condition of Business Firms Observed from the Tax Statistics - Own capital ratio : DBJ Data base - Deflator : Bank of Japan, Domestic Corporate Goods Price Index - Depreciation rate : JIP

19 Source of Data (Korea) Output and Material Deflator - Output : PPI (Producers Price Index) in BOK (Bank of Korea) - Material 8- ; Pyo et al.() - ; Intermediate goods and material deflator in BOK Labor Hour - Employee number : KIS (Korea Information Service, business report of firms) - Industry average labor hour : Monthly Labor Survey of Ministry of Labor Capital cost - Interest rate : BOK - Corporate tax rate : Kim et al.() - Own capital ratio : KIS, financial statement - Deflator : BOK Building and Structure : Intermediate goods and material deflator for construction machinery, tools, vehicle : total fixed asset formation deflator - Depreciation rate : Pyo() Source of Data (China) Output and Material Deflator Output: From NBS( the National Bureau of Statistics), except output deflator for agriculture and service sectors, which are from China Statistical book Material: Estimated based on data form NBS and Input-Output Table Labor hours The numbers of employee; from CSMAR Industry average labor hour: Estimated based on the data from Population Survey and Yang() Capital cost Interest rate: from PBC (The People s Bank of China) Corporate tax rate from CSMAR Deflator: Estimated based on data from NBS and Input-Output Table. We use the average price of capital goods, and they are machinery, tools, vehicle, and building and structure. Depreciation rate: from Harry Wu ()

20 Labor Cost Share in the manufacturing industry 8 / Japan Korea China.. Capital Cost Share in the manufacturing industry 8 / Japan Korea China..87

21 Intermediate input Cost Share in the manufacturing industry 8 / Japan Korea China.8.8 Labor Cost Share in the nonmanufacturing industry 8 / Japan Korea China.7.

22 Capital Cost Share in the nonmanufacturing industry 8 / Japan Korea China.. Intermediate input Cost Share in the non-manufacturing industry 8 / Japan Korea China.77.8

23 TFP Growth Rate in Manufacturing Industry (% per annum, Japan, Korea and China) Japan.7%.%.8%.77% Korea.%.% -.7%.7% China 7.% TFP Growth Rate in non-manufacturing Industry (% per annum, Japan, Korea and China) Japan.7% -.%.%.% Korea -.%.%.%.% China* 8.% *except for Oil and Gas Extraction Industry

24 TFP Growth Rate by Industry (Manufacturing Industry, Japan) p.a. Industry Name 8~ ~ ~ ~ Food and kindred products Textile mill products Apparel Lumber and wood Furniture and fixtures Paper and allied Printing publishing and allied Chemicals Petroleum and coal products Leather Stone clay glass Primary metal Fabricated metal Machinery non-elect...8. Electrical machinery.... Motor Vehicles.... Transportation equipment and ordnance.... Instruments Rubber and misc plastics Misc manufacturing.... TFP Growth Rate by Industry (Non-manufacturing Industry, Japan) p.a. Industry Name 8~ ~ ~ ~ Agriculture Coal mining Metal and nonmetallic mining Oil and gas extraction Construction Transportation Communication Electrical utilities Gas utilities Trade Finance Insurance and Real Estate Other private services Public service

25 TFP Growth Rate by Industry (Manufacturing Industry, Korea) p.a. Industry Industry Name 8~ ~ ~ ~ Food and kindred products Textile mill products Apparel.8... Lumber and wood Furniture and fixtures..7.. Paper and allied Printing publishing and allied Chemicals Petroleum and coal products Leather Stone clay glass Primary metal Fabricated metal Machinery non-elect Electrical machinery...7. Motor Vehicles.7... Transportation equipment and ordnance Instruments Rubber and misc plastics.... Misc manufacturing.... TFP Growth Rate by Industry (Non-manufacturing Industry, Korea) p.a. Industry Industry Name 8~ ~ ~ ~ Agriculture Coal mining Metal and nonmetallic mining Oil and gas extraction Construction Transportation Communication Electrical utilities Gas utilities Trade.... Finance Insurance and Real Estate Other private services Public service

26 TFP Growth Rate by Industry (Manufacturing Industry, China) p.a. Industrial Name - Food and kindred products Textile mill products Apparel Lumber and wood Furniture and fixtures Paper and allied Printing, publishing and allied Chemicals Petroleum and coal products Leather Stone,clay,glass Primary metal Fabricated metal Machinery,non-elect Electrical machinery Motor vehicles Transportation equipment & ordnance Instruments Rubber and misc plastics Misc. manufacturing TFP Growth Rate by Industry (Non-manufacturing Industry, China) p.a. Industrial Name - Agriculture Coal mining Metal and non-metallic mining Oil and gas extraction Construction Transportation Communication Electric utilities Gas utilities Trade Finance Insurance and Real Estate Other private service Public service

27 The Results of International Comparison of TFP between Japanese, Korean and Chinese firms -... Construction 8 Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

28 Food and kindred products Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Textile mill products Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

29 Apparel Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Lumber and wood Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

30 Furniture and fixtures Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Paper and Paper allied and industries allied Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

31 Printing, Printing publishing publishing and allied and industries allied Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Chemicals Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

32 Petroleum and coal products Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas Leather 8 Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

33 Stone, Stone clay, clay glass glass Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Primary metal Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

34 Fabricated metal Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Machinery Machinery (non-electrical) Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

35 Electrical machinery Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Motor Motor vehicles Vehicles Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

36 Transportation equipment and ordnance Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Instruments Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

37 Rubber Rubber and miscellaneous and misc plastics plastics Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Miscellaneous manufacturing Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

38 Transportation Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Communication Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

39 Electrical utilities Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Gas utilities Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

40 Trade Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas. Finance, Finance insurance Insurance and and real Real estate Estate Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas.

41 Other private services Note:- The shaded percentile areas band show and the -7 - percentile and -7 band percentile are shaded bands. areas Chemicals TAKEDA PHARMACEUTICAL CO.,LTD. MITSUI CHEMICALS,INC. MITSUBISHI CHEMICAL CORP. DONG-A PHARMACEUTICAL CO.,LTD. LG CHEM CO.,LTD. SAMSUNG FINE CHEMICALS CO.,LTD. SHANGHAI PHARMACEUTICAL COCLTD Sinopec Yizheng Chemical Fibre Company Limited SHANGHAI CHLOR-ALK ALI CHEMICAL CO.,LTD 8

42 Primary metal NIPPON STEEL CORP. KAWASAKI STEEL CORP. POSCO CO.,LTD. DONGKUK STEEL MILL CO.,LTD. ANGANG NEW STEEL COMPANY LIMITED 8 Electrical machinery LG ELECTRONICS INC. SAMSUNG ELECTRONICS CO.,LTD. MATSUSHITA ELECTRIC INDUSTRIAL CO.,LTD. TOSHIBA CORP. QINGDAO HAIER CO. CLTD. KOUKA GROUP COMPANYCLIMITED

43 Motor Vehicles TOYOTA MOTOR CORP. HONDA MOTOR CO.,LTD. HYUNDAI MOTOR COMPANY CO.,LTD. KIA MOTORS CORPORATION CHONGQING CHANGAN AUTOMOBILE CO., LTD. Dongfeng Automobile Co.,LTD 8 Issues in our comparison calculation Problems in estimation for relative intermediate price should be fixed, especially industry use imported intermediate goods heavily. Since a firm usually produces heterogeneous goods, its deflated sales by a common industry price index can be a misleading proxy for output.