A Study On The Changes Of China's Productivity And Its Determinants

Since the reform and opening-up, China has made great economic achievements and laid a good foundation for the further growth. However, while total GDP of China is still an extensive growth, how about the quality of economic growth is still of great importance to study. To improve the quality of China's economic growth is of great significance for sustainable economic growth.Firstly, this dissertation measures the total factor productivity (TFP) changes of 31 Chinese provinces and decomposes the TFP into technical efficiency change and technological progress by using the DEA method on the assumption that there are only two kinds of factor—labor and capital—which are used into the production process by using the inter-provincial panel data after analying the situation and the existing question of China's economy. It finds that the TFP grew fast during reform and opening-up period while China's economy grew rapidly. The anual rate of productivity growth reaches 2.4% of the national average and its contribution is nearly 65%. Descomposition of the productivity change manifests that the growth rate of technology progress is about 2.1% and the rate of technical efficiency change is about 0.4%.This means the TFP growth is mainly due to the technological progress other than technical efficiency change.Secondly, following the idea of mainstream economics,this dissertation investigates the determinants of China's TFP change from supply-side based on the measuring result of productivity. According to theories of new endogenous growth theory, TFP changes as a result of learning by doing, R&D investment, human capital growth, as well as international technology spillover. This dissertation tests the influence of above-mentioned factors on productivity by using China's inter-provisional data. It reaches the concludition that physical capital, R&D expenditures, human capital and FDI also have significantly positive impact on TFP, but there is no significant relation between import and productivity. Since China's reform and opening-up, per capita capital, R&D expenditures, human capital and FDI have improved significantly, so the growth of productivity is as the result of the common impact of capital deepening, R&D expenditures, human capital and FDI. Despite the substantial increase in imports over the same period, in theory, imports spill is also an important channel for technology, but the empirical results manifests that the international technology spillovers through import is limited though imports is also an important channel for international technology spillover theoretically. Further study showes that there are differences of effects on the speed of total factor productivity change among these factors. The change rate of productivity is getting slower and slower with the physical capital and FDI increasing. There is a phenomena suach as " decreasing marginal returns" of the effect of the above mentioned factors on productivity. However, there is a phenomena such as " increasing marginal returns" of the effect of the human capital on productivity. The change rate of productivity is getting faster and faster with the human capital increasing. The change rate of productivity has no significantly change while R&D expenditures increases.However, the supply-side factors can't explain the all changes of TFP, aggregate demand also plays an important role on the productivity change. Demand-side factors result in the productivity change in two different ways. On the one hand, demand-side factors has a direct effect on the productivity change, such as resulting in the efficiency change of factors allocation, scale economy, as well as technology adoption. This dissertation studies the effect of aggregate demand on technology adoption detailly and points out that firms operating in larger markets have greater incentives to adopt more productive technologies, even if the technology does not require R&D expeniditures. On the other hand, aggregate demand can also result in the changes of physical capital investment, R&D expenditures, human capital and FDI, import, as well as other supply-side factors. This means aggregate demand has an indirect effect on TFP. Empirical results show that there are two kinds of effects of aggregate demand on productivity.With the expanding of China's total economic output, the demand for factors of production increases, at the same time, the supply-side of factors changes greatly, the contradiction between supply and demand is becoming seriously. China has to face the situation of ever-rising factor price in a fairly long period. This dissertation investigates the effects on TFP of prices change of factors. In theory, a rise in the price of any factor leads to two difference kinds of effects on TFP. One is favorable for promoting growth of TFP throgh the transfer from the low efficiency use to high efficiency use. The other is unfavorable for TFP growth because a rise in price of one kind of factor lowers the efficiency of other factors. Therefore, when a factor price changes, the impact on productivity is uncertain. This dissertation investigates the influence of the price change of factors on the TFP by FMOLS method based on the unbalanced panel data during 1989-2007 after unit root test and cointegration test. Through estimating the cointegration equation, It finds that there are different influences of different factors. The price rise of capital has significantly postive effect on TFP, the rise of wage has no significant effect on TFP, but the rise of resource price has significantly negative effect on TFP.