Institutional Analysis On Optimization And Upgrade Of The Industry Structure

Modern Economic Growth is often companied with the upgrade and optimization of industry structure, but the extensive growth not. In the process of transition Chinese political, economic institutions can explain the majority of the industry structure differences. The industry structure change is companied by the technology upgrade on which is paid attention usually. But the new institutional economics gives a perspective since it comes into China. The old industry structure theory put more stress on the industry policy and city function to establish the leading industries. But now, the research on the upgrade and optimization of industry structure must switch to the orbit on which the market adjusts the industry structure. The core of the government making up for the market failure lies on the transformation of administrative and economic functions of the government. It must consummate the property rights, financial, population move, decentralization institutions. An incomplete market system institution will make it win the growth but lose the structure, and vice versa.The historical review on the economic development and industry structure evolution, and the demonstration for the relationship between the variables support the above conclusion, and put light on the stagnation of the services industry in Shanghai. Chapter one explains the meaning, approach and goal of this paper. Chapter two summarizes the correlative literature. Chapter three establishes an analysis frame of the industry structure from the institution's point of view. Chapter four uses Chenery model of GNP per capita to calculate GDP per capita which is 8618 USD by registered permanent residence (according to the price in 2005), and which is 6318 USD by the total population. Shanghai is in the middle and after period of the industrialization. But it is first and last far from the mechanism on which the market adjusts the industry. The industrialization is not called the real industrialization if it is not on the basis of market rules. Chapter Five goes into the institutional analysis. It constructs a market index which is symbolized by the non-state owned industry production value proportion and compositive market index. The later main element is the non-state owned industry production value proportion. The demonstration results are: the relation between GDP per capita and the non-state owned industry production value proportion is positive in the short run, but negative in the long run. It shows that the non-state owned industry grows in the number, but not in the quality. The check after aparting from the government consumption shows that the GDP per capita changing rate Granger causes the compositive index without the government consumption, but not true in the reverse. The compositive index including the government consumption Granger causes GDP per capita growth rate, but not true in the reverse. The compositive index including the government consumption has the stable relation in the long run, but not true for the non-state owned industries. From the absolute value point of view, the decrease of the state owned industry proportion benefits the increase of the industry production value of over-scale. Its elastic coefficient is 0.6. Demonstration using Chinese market index shows that GDP per capita increases by 6060 RMB, the second industry increase by 1% and the Third industry decrease by 0.09% if the market index increases by one point. All the results show that the market system institutions are not perfect , the non-state owned economy faces many obstacles in the entrance into the third industry.Chapter Six reviews the financial institutions about the bank credit and securities market. It shows that the bank credit rate and the third industry proportion does not have the stable relation in the long run, but not Granger cause each other. It shows that the bank credit tends to invest in the manufacturing. The Stock finance proportion also does not Ganger cause the increase of the third proportion. It does not put contribution to the allocation of resources and the efficiency in the third industry. Chapter Seven analyses the relation between the population move and the registered residence institution, using the panel data to check the effect of the population on GDP per capita by registered permanent residence and GDP per capita by total population. The elastic value of the human capital, bring-up rate and the capital stock per capita on GDP per capita are 0.95, 0.7 and 0.68. Investing more on the human capital can inforce the increase of GDP per capita. The three values become smaller for GDP per capita by total population. The net move rate benefits the increase of GDP per capita by registered permanent residence, but not the increase of the GDP per capita by total population. And elastic values of the town population on both cases are almost the same, amount to 0.01.Chapter Eight checks the profit and cost of the decentralization reform, including the same structure and reconstruction. The government fiscal expenditure does not Granger cause the development of the third industry, It focuses on the manufacturing. Comparing with Jiangsu and Zhejiang, Shanghai industries are almost the same apart from the financial services, leasing and business services, agriculture and excavation. On the one hand, Shanghai has the same manufacturing in Yangtse Rive triangle area. On the other hand, with the efforts of the government of Shanghai, The centralization degree of the financial services is going up, the status as the international financial center is boosting up and the services function of the metropolis is coming into being.In summary, The upgrade and optimization of Shanghai industry structure depends on the function transformation of the government and the perfection of the market rules, institutions in the case of GDP per capita which is over 5000 USD.