  Understanding the microeconomic details of technological catch-up processes
offers great potential for informing both innovation economics and development
policy. We study the economic transition of the PR China from an agrarian
country to a high-tech economy as one example for such a case. It is clear from
past literature that rapidly rising productivity levels played a crucial role.
However, the distribution of labor productivity in Chinese firms has not been
comprehensively investigated and it remains an open question if this can be
used to guide economic development. We analyze labor productivity and the
dynamic change of labor productivity in firm-level data for the years 1998-2013
from the Chinese Industrial Enterprise Database. We demonstrate that both
variables are conveniently modeled as L\'evy alpha-stable distributions,
provide parameter estimates and analyze dynamic changes to this distribution.
We find that the productivity gains were not due to super-star firms, but due
to a systematic shift of the entire distribution with otherwise mostly
unchanged characteristics. We also found an emerging right-skew in the
distribution of labor productivity change. While there are significant
differences between the 31 provinces and autonomous regions of the P.R. China,
we also show that there are systematic relations between micro-level and
province-level variables. We conclude with some implications of these findings
for development policy.
