The Study On The Nonlinear Relationship Of The Technology Gap And Economic Growth

Form capital formation perspective, inward FDI can crowd in the host country's domestic capital through making up for its financing gap, or taking advantage of the host country's preferential policies to crowd out domestic capital by creative destruction. In this way, it affects the host country's economic growth. From technological spillovers perspective, inward FDI is of double-edged nature in terms of the impact of technological progress. When the technology gap is too large or too small, attracting foreign investment can hardly produce technological spillovers. On the contrary, it may further widen technology gap, let alone it stimulates technology progress. Only when the technology gap is appropriate will it become shrinking. Similarly, there is also absorption threshold for human capital. When the technology gap is too large, the host country can not be able to absorb technological spillovers from inward foreign investment because of the constraint of absorptive capacity. However, when the technology gap is very small, it is of little significance to absorb technological spillovers. To boil down, it can be seen that the technology gap seems to be inextricably linked with the determinants of economic growth and it is also of uncertain relationship with economic growth. Based on the results of previous studies, using endogenous growth models and the theory of the nonlinear relationship between technology gap and technological spillover, this paper explores the relationship between technology gap and economic growth both at the theoretical and empirical levels. According to the results, this paper has brought forward policy recommendations on attracting foreign investment, introducing technology, developing human resource and transforming economic growth mode.This paper focuses on the nonlinear relationship between technology gap and technological spillovers as well as their dynamic changes based on the analysis of the relationship between technology gap and technology introduction, independent innovation, technology imitation. Weighing the benefits and harms of the introduction of technology, independent innovation and technology imitation, this paper has analyzed the impact of appropriate intellectual property right protection on independent innovation and technology imitation under appropriate technology conditions. We have discovered that the application of inappropriate technology is likely to expand the technology gap, impede technological progress and slow down economic growth. In addition, we have selected indicators to quantify technology gap and analyze its changing trends prior to further in-depth study. At the same time, through the analysis of technology spillover indicators under the framework of the economic growth model, we know that it is not possible to quantify technology spillover through the traditional approach because the output data of foreign sectors is not available. One feasible way is to include technology spillover as a part of technological progress into the growth model to analyze its relationship with the technology gap.In the point of view of the nonlinear relationship between technology gap and technological spillovers as well as demonstration effects, competition effects, job-hopping effects, linkage effects of technological spillovers, technological spillovers will lead to a gradual convergence of the technology gap and effectiveness of technological spillovers will diminish. As China's capital-driven economic growth under way, the high capital investment (including inward FDI) had led to the low rate of technological progress, indicating a downward trend of the growth rate of technological progress rate. As the Southeast Asian financial crisis alerts, such a growth mode is inefficient and unsustainable. It will not only bring a lot of resource and environment pressures, but also is likely to result in an economic crisis. Therefore, the transformation from capital-driven growth mode to innovation-driven growth mode is imperative. Through attracting foreign investment, conducting domestic research and development, increasing human capital investment and speeding up independent innovation, the technology gap can shrink in order to achieve sustainable, rapid and stable economic growth.This paper focuses on the study of the relationship between technology gap and economic growth. Based on the endogenous economic growth model including human capital, we establish a model to link technology gap and economic growth together through introducing FDI into domestic capital, and introducing the nonlinear relationship between technology gap and technology spillover into technological progress. Then, we made an empirical analysis. Thus, the technological requirements of testing the relationship in original cointegration theory can be simplified. Based on the panel data estimation of China's 29 provinces, the results show that there is inverted U-shaped nonlinear relationship between technology gap and economic growth, and that will impact a lot on growth effects of various regions in China. It is of great value to China's practices such as foreign investment, introduction of technology, development of human resources and other technology-sourcing outward FDI with the establishment and validation of this model.Furthermore, through establishing the model of the non-linear relationship between the technology gap and technological progress, this paper has concerned the quality of economic growth. With regard to the theoretical calculations of technological progress, there are many disputes. Aimed to fully reflect the proposition of the nonlinear relationship, this paper has respectively measured total factor productivity, the rate of technological progress and technological efficiency by regression and DEA method. The results show a low rate of technological progress and the growth of technological progress is on a declining. Meanwhile, in order to avoid the error caused by the approximate measurement of the critical threshold value of the technology gap by the way of quadratic method and the t-statistics test, we have used the Jackknife method to conduct a precise calculation for the critical threshold value of technology gap. As for the endogeneity problems of technology gap, we have used the instrumental variables method to amend it.Finally, based on the theoretical analysis and empirical results, we have proposed related policies and recommendations to shrink technology gap, push forward sustained and rapid economic growth. Firstly, the impact of technology gap on regional economic growth varies a lot. Not all technologies are beneficial to the development of a region or an industry in the process of attracting foreign investment. Technology gap shrinks given the technology level well considered, region and industry-oriented policies adopted appropriately and cross-regional technology transfer stimulated right way. Secondly, each area should focus on increasing technological efficiency and accelerate the shrinking of technology gap by scientifically choosing and introducing technology, carrying out an appropriate technology strategy, leaping over the threshold of technology spillovers through various ways. Thirdly, with regard to those regions where they had already leaped over the threshold of technological spillover, it is mainly important to enhance human capital accumulation efficiency, increase demonstration and imitation effects of technological spillover, accelerate proper liquidity of human capital and try to enhance the absorb ability so as to digest them in competition. Then, it is important to perform technology-sourcing outward FDI when technology gap become too small to absorb technological spillovers, which is a great opportunity to benefit from industry agglomeration and reverse technological spillovers abroad. Finally, equally important is to establish research and development supervision and incentive mechanisms to protect the interests of R&D personnel and to get through the spillover channel of the regions and industries with threshold of technological spillovers. To transform economic growth mode, the top priority is establishing an efficient science and technology R&D and independent innovation channel.