Technical Progress, Capital Deepening And Employment Variation: A Comparative Study On China's Regions

In the recent years, with the development of the industrialization procedure, the employment problem in China is rising. The high economic growth does not brought the corresponding employment but being suppressing the employment flexibility. On the other hand, the trend of capital deepening appears both in the industry and ministry in China, representing as the continuously increase of the capital-labor ratio. These phenomena have attracted much attention. Mr. Peigang Zhang defined the "industrialization" as "the continuously changing procedure of a series of fundamental production function" in his famous word "agriculture and industrialization". If treating the entire economic development of China in the last 30 years as one production function, the employment problem has much relationship with the changes of the technique, capital and labor factors in the product function. Therefore, it has much theoretical and practical significance to discuss in both positive and normative aspects the relationship between technology progress, capital deepening and employment.The impact of the technology progress and the capital deepening since the carrying out of the opening-up policy on the employment is very complicated, and the corresponding theoretical frame has not been fully established. The research on the relating effect between the technology progress, capital deepening and employment has seldom been reported at the moment, especially for the positive on the region and industry aspects. In this paper, the second and third industrial employment and the capital deepening have been analyzed and compared, and several remarkable problems are as follows:(1)The second and third industries in the east China where the economic developing level is higher, have the lower employment flexibility on the contrary, comparing with those in the central and west China. (2)Using the capital-labor and capital-product ratios as the standards of reviewing the capital deepening degree, we found that the second industry in the west China where the economic developing level is lower, have the highest capital deepening degree, and the investment rate (ratio between investment and GDP) is also highest in the east, central and west China.(3)Using the whole financial firm deposit plus financial firm loan dividing the GDP in the region as the standard of the finance credit expanding, finance credit expanding degree of the west China in a majority of the years before 2000 is higher than those in west and central China.From the point of view from the common economic theory, the product and bank are the foundation of the investment. Compared to the developed east China, the developing level of the west China is lower, the market economic institution building is needed to be strengthened, and the development of the finance institution is also lagged. However, the capital deepening and finance credit expanding degrees of west China are highest, which is doubted by the researchers. In this paper, we attempt to account for the above phenomena within the frame of technology progress-capital deepening-employment increase.From the theoretical point of view, technical progress will lead to the variations of the proportion between the capital and labor elements. Our positive shows that although both the second and third industrial technical progress has the trend of capital-enhancing, but this is not the main reason of the capital deepening in China. The impact from technical progress on the factor structure in China behaves as the "crowd out" of labor force, which is a disadvantage to the China's employment. On the other hand, the capital deepening in China also brings the substitution of the labor force in most regions, which significantly gives an edge to the exacerbating employment situation. This needs the utmost attention from the academe and the relating decision-making apartmentsThe main contents are as follows: Chapter 1 is the introduction to the background, aim and significance of this paper, including the research method and analysis frame.In chapter 2, we summarize the theory and references of the technology progress, capital deepening and employment, as the basis of further research.In chapter 3, we discuss the action and impact mechanisms between the technical progress, capital deepening and the employment. After comparing the background and the impact factors of the choice-making pattern on technology route in China with those in the west, we elicit such an empirical judgment: Due to the complexity of the economic transition and the weakness of the market mechanism, independent technical choices of the corporations have warped under the influences of different factors; On the other hand, a mass of corporations passively choose the capital-enhancing technical route under the influence of the government's strategy. The "non-technical" factors result in the warp of the whole technical choice of China's corporations. Then, the anticipations for the relationship of the technical progress and capital deepening in China, and the employment of the technical progress, should be cagy.In chapter 4, we analyze and compare the product, employment and capital deepening of different regions in China based on concretely estimating the capital stock of the second and third industries of different provinces and cities of China from the year of 1978-2007. It is found that during the year of 1978-2007 the second and third industries in different regions of China have appeared the significantly enhancing capital deepening and the differences between the capital deepening degrees have been enlarging, which exhibits a notable divergence. For the second industry, the capital deepening degree of west China is much higher than that in other regions, also as the investment rate. For the third industry, the capital deepening degree of east China is much higher than that in other regions, but its employment flexibility of third industry is lower on the contrary. The undeveloped west China has the higher investment rate and capital deepening degree than other developed region, which is a notable phenomenon. In Chapter 5, we measure and compare the technology progress of both the whole economy and second and third industries by means of Malmquist method based on DEA. It is found that the TFP of entire economic has been growing since 1985. The provinces with the highest increase of TFP mainly distribute on the east China, while the majority of the provinces with the decreasing TFP distribute on the central and west China, which indicates to some extent that the whole technology progress level of east China is higher than that in other regions; for the third industry, the technology progress in east China keeps ahead that in central and west China, but for the second industry it is opposite. Viewing on the region and product characters, there is a possible relationship between the technology progress and the capital deepening, which needs the further support from the positive.In Chapter 6, we analyze on the basis of the previous chapters the characters of the technical progress of the second and third industries and checkup the consequence between technical progress and the capital deepening of China. It is found that technology progress is not the granger reason of capital deepening in China, indicating that capital deepening is not a technology phenomenon in China, although both the second and third industrial technical progress in the most regions of China is capital-enhancing. This result is in agreement of the analysis in chapter 3: Under the complicated institution of China, different "non-technical" factors lead to the warp of the whole technical choice of China's corporations. Then the capital deepening in China has much more relationship with the "non-technical" factors.After denying that technology progress leads to the capital deepening, we start with the institution aspect of China and put forward another assumption about the reason of capital deepening and check it up: under the institution of Fiscal decentralization in China, the local government faces the pressures both from financial expense and region competition, the relative undeveloped region trend to strengthen the intervention of the investment due to the low economic level and financial pressure of the government. They urge the banks to increase their scale of loan via forcing the finance firm, and financial fund heavy flow to the government-controlling state-own economic domain, which speedups the finance credit expanding and drives the capital deepening in the industry domain. Our assumption is also supported by the positive: The co-integrate relation and the Granger consequence existing among the government financial pressure, finance credit expanding and capital deepen data. It is also found that the state-own economy in west China is dominant in both investment and employment domains, which confirms our assumption and explains why the second industry in west China has the high investment rate and capital deepening level.In chapter 7, we focus on the positive analysis of relationship between the technology progress, capital deepening and employment increase. It is shown that the technology progress greatly negatively impacts the employment increase in the major regions in China, while the capital deepening in west region speedups the employment increase. On the other hand, the characters of the second industry in the major regions in China are the capital-enhancing, which implies that the industrialization in China has experienced a route of capital deepening; Both in the whole state and east China, the third industry technology progresses are capital-enhancing, while the third industry in west China appears as the technology progress of labor-enhancing.In Chapter 8, we propose some countermeasures and suggestions for the industry development and employment policy in the background of capital deepening and labor force surplus.