The Convergence Mechanism Of Economic Growth: Theoretical Analysis And Emprical Checking

Economic growth convergence theory has become one of the most popular topics in economic growth theory.since the 1990s. The core of this issue is inspecting the economic growth rate of different economies or different regions in a country, looking for the causes of differences in the growth rate. For China, a large number of regions and significant economic disparities which has significantly widened sometimes across regions, this topic is particularly realistic. Very clear, the economic gap has become wide or shorten across regions can be first attributed to regional different rate of economic growth in the past 20 years.For China's inter-regional economic gap, although there has s a lot of research literature and quite a few research analyzed from the angle of convergence theory, but there has few analysis involved convergence mechanism. On the basis of existed research, the paper extended the convergence proposition to the convergence mechanism and reveal convergence mechanism of economic growth in theory. Based on the above analysis, the paper tested convergence mechanism of economic growth used the provincial data in China.In theory, the paper analyzes basic models and convergence mechanism of economic growth. The analysis of the basic model indicates that endogenous growth and economic growth convergence can be contained in a neo-classical endogenous growth models. This shows that we should not be confined to capital convergence mechanism brought forward by neo-classical model, but found convergence mechanisms from a more broad-based growth model included new growth model. Hence, we built a model included three factors of capital accumulation, labor flow and technology diffusion. In this framework, the paper analyzed the impact to economic growth convergence from various variables.The paper shows that there are three main mechanisms: capital convergence mechanism, technology convergence mechanism, labor productivity convergence mechanism. Capital convergence mechanism can be summarized as: diminishing marginal return→convergence of capital→economic growth convergence. In the premise of the existence of external characteristic of technical expertise, if backward regions are able to imitate and absorb advanced technology owned by developed regions, then backward regions can reduce costs and risk of R&D, so as to speed up technological progress. Therefore the rate of economic growth of backward regions can develop faster than advanced regions. Technology convergence mechanisms can be summarized as follows: technology diffusion (through trade and investment channels)→technology convergence→economic growth convergence. As the economy is gradually opening up and the market is gradually uniting, factors will mobile fast in the different industries and regions. Factors' movement will lead to convergence of productivity and thereby promote economic growth convergence. Labor productivity convergence mechanism can be summarized as follows: labor productivity factors (capital, labor, in the regions and between regions)→convergence of productivity→economic growth convergence. Three convergence mechanisms are closely linked with each other and complemented each other.In addition, economic growth has a number of other auxiliary mechanisms, such as the pricing mechanism, the credit-human capital mechanism. These two mechanisms are closely linked with trade.Empirically, the paper tests two aspects of convergence mechanism and outputs. First, the paper tests the functions of capital convergence mechanism, technology convergence mechanism and labor productivity convergence respectively; second, the paper tests the convergence of economic growth according to the indicator of per capita GDP; third, the paper makes a comprehensive analysis from the perspective of convergence mechanism and per capita GDP, and explains convergence or divergence of economic growth.In addition, based on the framework of decomposition of labor productivity growth, the paper decomposes labor productivity growth of provincial data in order to reveal the source of convergence or divergence the labor productivity growth. Using Kernel density map, the paper further analyzes of the effects of various factors on the distribution of labor productivity.Empirical results show that capital convergence mechanism, technology convergence mechanism and labor productivity convergence mechanism have played a significant role of convergence during 1978-1989. This leads to the results of significant convergence of per capita GDP; capital convergence mechanism and technology convergence mechanism have played a significant role of divergence during 1989-2004, while labor productivity convergence mechanism show no function. This leads to the results of significant divergence of per capita GDP; capital convergence mechanism, technology convergence mechanism and labor productivity convergence mechanism also have played a significant role of convergence during 1978-2004, this leads to the results of significant divergence of per capita GDP. Kernel density table showed that the per capita GDP performed a certain degree of "club convergence" feature. According to the analysis of the mechanism perspective, we can see that "club convergence" of per capita GDP was mainly due to capital and labor productivity mechanism have played a role of "club convergence". Meanwhile, the empirical analysis of convergence mechanisms have given reasons why actual rate of convergence lower than the theoretical value.Based on the above analysis, the paper presents the corresponding policy and expects convergence mechanism of economic growth to fully function,so as to promote China's regional economic develops coordinately.