Research On Estimating China's IT Economic Value Based On Growth Accounting Model

The performance of the U.S. economy surged in the second half of the 1990s, which inspired the long-running debate again in economic literature on whether information technology (IT) revolution is being paid off the economic growth. Many researches have shown that IT has been the key factor behind the improved productivity in U.S. economy. Researches also indicate that IT return is significant and positive in other developed nations.The performance of China's economy has been remarkable since 1980. From 1980 through 2003, real gross domestic product (GDP) rose at an annual rate of 9.10 percent, companied by the expending of IT industry. From 1999, China has been the third nation in term of electronic and information products manufacturing, following US and Japan. Has China's economy reaped in IT investment? Can the phenomenon also be observed in China that economy has been benefited from IT in developed nations, such as U.S. and Japan? The questions mentioned above are important issues which economists in China nowadays have to face up with. Through examining the questions above, we can take advantage of growth experiences in developed nations. Thus, guided by experiences of other countries, China's economy can develop more healthily in the future. However, at present, there has been scarce empirical research on interpreting China's economic growth from a perspective emphasizing IT as a factor.As it is scarce that the research about growth contribution devoted to IT in China, we adopted the growth accounting model(GAM) to estimate the impact on China's economy from IT manufacturing and IT investment in production process. Main contents of the paper are as follows:1. Through comparing the differences between econometrics model (EM) and growth accounting model (GAM), we analyzed hypotheses and the needed-data of the two models. We found, in the research of estimation IT contribution, that data needed by EM are much less than the data needed by GAM. Then, we chose EM to go on our research because of data availability in China. During our experimental test, we found that the regression results are disturbed badly by sample quantity and collinearity among independent variables. Our findings suggest that simply regression methods are not suitable to measure IT economic value. Based on findings above, we chose GAM as measure model followed foreign researches at last.2. We confirmed basic research data framework according to the IT definition from U.S. research. Furthermore, to those kinds of data which have not been published by government at present, we made certain data deduce models based on correlative literatures. The data we deduced in our research including IT price index, IT productive capital stock and IT user cost. First, we constructed IT price index based on harmonized deflator, which has not been investigate in China before. By investigating the relationship between IT investment price and IT output price, we deduced IT output price index through producer production function. Second, we estimated IT productive capital stock deriving from IT investment more than two decades in China. The results attribute to our understanding about the IT potential productive capability in China. At last, based on discussion about productive capital stock and its translation to capital service flow, we calculated the user cost of IT capital service flow. Furthermore, based on user cost calculated above, we measured physical index of IT capital stock flow. To ensure the reliability of our results about IT user cost in China, we compared our estimation with those of foreign researchers'.3. According to the data collected and deduced above, we estimated the degree that how much of IT manufacturing and its use in production has been translated into the force to economic growth and productivity improvement in China. Based on GAM, this result put forward an empirical proof for estimating IT economic value in China, which has not been investigated before. During the research on productivity improvement from the use of IT, we estimated the independent impact of software, communication equipment and hardware through the relative price of input and output.4. We compared our estimation to that of U.S. and Japan. By this way, we analyzed the growth methods and productivity improvement among the three countries. Suggestions to IT development and investment at country level are also provided.The contribution of our research is that we put forward the concrete criterion to evaluate IT economic value from large scale of IT investment for more than twenty years in China. Another contribution of our paper is that we offer a proof that economy development can be benefited from information technology, even in developing country. Through empirical research on how much of the boost to economic growth and to productivity improvement can be attributed to IT investment, we find that: IT has played an important role in China's productivity growth since 1980. This rapid advance has been stronger in recent years, accompanied by the expansion of IT industry and continued increase of IT investment in China. When compared with developed countries, China's economic growth has been relying heavily on hardware. Contribution to China's economic growth from software lagged far behind developed nations. Furthermore, despite of productivity growth has been slower since the second of 1990 in China, IT has also impelled productivity improvement continuously.