Do Labor Values Explain Chinese Prices? Evidence from China’s Input-Output Tables, 1990–2012

Abstract

We use China’s input-output tables from 1990 to 2012 to study the deviations between labor-value-based direct prices, prices of production, and market prices. We find that the cross-sectional deviations between direct prices and market prices averaged 17–18 percent, and the variations in relative direct prices can explain about 70 percent of the variations in relative market prices over time. Marxian and Sraffian production prices have significantly smaller deviations from market prices. When our study is applied to productive capitalist sectors, the average deviations between direct prices, Marxian prices, Sraffian prices, and market prices are reduced significantly. The results suggest that price theory based on either the Marxian or classical tradition can largely explain observed market prices in the productive capitalist sectors in China. JEL Classification: B51, C67, O53.