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Total factor productivity represents the difference in productivity that cannot be explained by the enterprise’s own factor inputs, such as the technical level, organizational efficiency and operating environment. In general, an increase in total factor productivity tends to raise the marginal productivity, thereby increasing the demand for labor and promoting the transfer of agricultural labor. Concerning the estimation of total factor productivity at the provincial level, a method of fixed effect for Solow residuals and a Generalized Method of Moment (GMM) estimation method of Arellano and Bover are provided in the literature.¹⁹ The method of fixed effect for Solow residuals may encounter two problems, namely, Simultaneity Bias, and Selectivity and Attrition Bias. The GMM method, especially the systematic GMM method, can solve the regression problem of macro variables to a large extent by introducing the level of the endogenous variable and the differential lag term as instrumental variables.²⁰ Therefore, the systematic method of GMM estimation is adopted to estimate the total factor productivity of provinces and regions by use of the industrial sector GDP, the net value of fixed assets of industrial enterprises above the designated size and the industrial enterprise labor panel data of 31 provinces, municipalities and autonomous regions in China from 1978 to 2010.