On the basis of development accounting techniques and a factor misallocation framework, we use panel data of 30 Chinese provinces from 2000 to 2013 to assess how factor allocation affects economic growth and unbalanced regional development in China. In particular, we decompose economic growth into three parts, namely sector productivity (SP), factor market efficiency (FME) and factor endowment (FE). We then conduct counterfactual analyses to investigate the short and long‐run roles of factor all