Abstract: Based on the analysis of the mechanism of government efficiency competition affecting enterprise total factor productivity and the data of China Industrial Enterprise Database from 1998 to 2007, a multi-dimensional system for evaluating government efficiency is constructed. Using Data Envelopment Analysis(DEA) to quantify the government efficiency of Chinese provincial governments, this paper empirically examines the impact of government efficiency competition on enterprise total factor productivity. It is found that there is a significant U-shaped relationship between government efficiency and enterprise total factor productivity, that is, government efficiency competition inhibits the improvement of enterprise total factor productivity through “governance cost effect” in the early stage, and the improvement of government efficiency will promote the progress of enterprise total factor productivity through “market allocation effect”.The influence of government efficiency competition on enterprise total factor productivity shows significant difference after distinguishing the property of enterprise ownership, technology level and region. Therefore, in the context of promoting the modernization of the national governance system and governance capacity, the government should continue to strive to optimize the structure of fiscal expenditure, improve the efficiency of the government, and promote the competitiveness of domestic enterprises.

Key words: words：government efficiency, heterogeneous firms, total factor productivity, governance cost effect, market allocation effect