| Manufacturing has been growing by leaps and bounds as a pillar industry in national economywith the all-round development of economic society since the implementation of the reform andopening-up policy and has played an increasingly important role in promoting national economy.However, compared with the slight fluctuation of the price of capital, the price of labor risessteadily since1990s. Under the guidance of the national income-improving policy, the price oflabor has come to a rigid rising stage since the new century which increases the production cost ofthe plants, and further increases the price of the manufactures, thus has a negative impacts onexportation and domestic consumption. Under this circumstance, rational plants will adjustcapital-labor ratio on the basis of constant technology in short terms; while improve the efficiencyof factors, extend the scope of substitution of capital for labor through technology progress in longterms. Investments play an important role in the above-mentioned two circumstances, especially inthe latter one. Two types of investments (domestic investment and foreign investment) will makedifferent impacts.In view of the background mentioned above, the rising price of labor leads to the substitutionof capital for labor and a series of subsequences in the manufacturing. This dissertation is devotedto probe into the factor substitution effects ensuing from the rising price of labor in themanufacturing by econometric methods. The main content of this dissertation is as follows:Chapter1of this dissertation first presents the research background, research significance andliterature review of related studies, and then puts forward the research questions and framework ofthis dissertation basing on this.Chapter2firstly theoretically analyzes the plants’ the two ways of realizing factor substitutioncaused by relative variation of the factor price, including the direct substitution under the constanttechnology and the induced technology innovation after the variation of technology. Following thetwo ways of factor substitution, this dissertation makes a theoretical analysis on the transmissionmechanism of factor substitution realized by investment which includes the direct way of“investment—factor substitution” and indirect way of “investment—technological progress—factor substitution” and emphatically analyzes the mechanism of technology progress throughdomestic and foreign investment of the indirect way, thus laid a theoretical foundation for furtherempirical research.Chapter3firstly divides the manufacturing industry into three categories: labor-intensive industry, capital-intensive industry and technology-intensive industry, then studies the regularitiesof the substitution for labor presented by the data of different industries in different provinces andoverall sample between1999and2010basing on the Variable Elasticity of Substitution (VES)model. It is found that the returns to scale increases progressively; the calculation result of the rateof technical substitution shows that the capacity of substitution of capital for labor ranks in this way:labor-intensive industry, capital-intensive industry and technology-intensive industry; thecalculation result of the elasticity of substitution shows that factor price ratio influence factor inputratio in labor-intensive industry mostly, while there is largest variation of the elasticity ofsubstitution in capital-intensive industry.Chapter4, taking the rising price of the manufactures as the background, continues to use thethree industries as the research objectives, studies the different impacts of factor substitution andlabor price on the price of the manufactures during2002to2010. It shows that factor substitutionhas a negative impact on the price of the manufactures in long term and ranks in this way:capital-intensive industry, technology-intensive industry, labor-intensive industry. Furthermore, bythe method of Granger causality tests based on PECM, it can be concluded that factor substitution,labor price and price of the manufactures have mutual impact in long term; while in short termfactor substitution has a negative impact on the price of the manufactures only in capital-intensiveindustry, however, labor price has a positive impact on that in all three industries. That is thereasons why the price of the manufactures is hard to control. Moreover, it is found that labor pricehas a positive impact on factor substitution both in long term and short term.Chapter5firstly decomposes and defines the two kinds of effects of factor substitution: directsubstitution effect and induced innovation effect, then studies factor substitution effect caused byfactor relative price based on CES production function model from1995to2010. It is found inempirical analysis that the relative rising of labor price to capital price leads to the increasing ofinput ratio of capital to labor. Furthermore, based on ECM, it can be concluded that the influence ofdirect substitution effect is that the ratio of capital price to labor price decrease1%leads to a0.073754%increase in the input ratio of capital to labor, while the influence of induced innovationeffect is that the ratio of capital price to labor price in last period decrease1%leads to a0.208568%increase in the input ratio of capital to labor, which account for as much as73.88%of factorsubstitution effect. Therefore, induced innovation effect plays a more important role in Chinesemanufacturing.Chapter6probes into the different sources of28specific industries of manufacturing from theperspective of domestic investment and foreign investment. Firstly it makes a descriptive analysisof the stock of domestic and foreign capital, and finds that28specific industries differ from eachother in the aspect of investment structure. By fixed effect variable coefficient panel data model and FMOLS, it reveals that among the28specific industries, foreign investment has significantinfluence on factor substitution in17specific industries, whereas domestic investment hassignificant influence on factor substitution in22specific industries. Those specific industries canbe divided into four categories. Furthermore, it shows that foreign investment has greater elasticeffect on factor substitution than domestic investment does by using estimation of parameter. Inaddition, foreign investment has a greater impact on factor substitution in those specific industrieswith low ratio of foreign investment to domestic investment; on the contrary, domestic investmenthas a greater impact on factor substitution in those specific industries with high ratio of foreigninvestment to domestic investment. |
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