Changes In Industrial Structure And The Convergence Of Economic Growth

The process of industrial structural change is the redistribution of resourcesamong industries, which includes the stage of the secondary industry leading resourceallocation and the other stage of the tertiary industry leading resource allocation,Obviously, structural changes in these two phases have a different efficiency ofresource allocation. As stressed by the dual economic model (Lewes model, Ranis-Fei model, Jorgenson model, Harris-Todaro Model), Changes in the industrialstructure of the industrialization phase have a positive role in promoting the economicgrowth: in the pre-industrial prase, Traditional agriculture is in the state of zeromarginal productivity of labor due to the aggregation of a large amount of surpluslabor. Due to the absence of modern industry, labor rising will be seriously hamperedthe development of the national economy, and even lead to the entire nationaleconomic system into a Malthusian economic trap. But at the stage of industrialization,as labor is transferred from inefficient industries (traditional agriculture) to theefficient industry (Modern Industry), labor force will achieve higher laborproductivity, at the same time, due to the gradual reduction of the surplus labor force,labor remained in the traditional agricultural labor will achieve the continuousimprovement of labor productivity and, therefore, the general increase in laborproductivity will lead the national economy into the faster economic growth path. Inother words, the economies in the industrialized stage can get "structural bonus" fromthe secondary industry leading resource allocation, Thus， It will continue to optimizethe path of economic growth.As tertiary industry began to dominate the changes in the industrial structure,structural bonus of the industrialization stage will gradually disappear, As Baumol say,The industries with different productivity have different roles for promoting economic growth, those industrial sectors with low productity (the stagnation department) willbear the burden of the high cost, these inefficient sectors will offset the graduallyincreased cost pressures by raising prices faster, reduce the quality of this offset. Dueto such stagnation sectors, the economy’s overall productivity and real output willdecline (maybe there is possibly a decline in the growth rate), this phenomenon isknown as "Baumol’s cost disease". Baumol thinks the secondary industry belongs tothe “progressive sector” with higher efficiency, the service sector are “stagnantsector” with lower productivity, although there are significant differences in theproduction efficiency for the two categories of industry, but their wage rate issubstantially equal. Therefore, compared to the secondary industry, the unit cost andproduct price of the tertiary industry will rise faster. At the same time,the elasticity ofdemand for products of specific sector within the tertiary industry is lack of flexibility,such as health care, education and other sectors, so that consumers are will ing toaccept the high price of these industries, In this trend, even if industral structure inreal output ratio remains unchanged, while total consumer spending will continue totend to the stagnant sector of the service industry, this is Baumol’s cost disease. Ofcourse, the overall productivity of the economy is the weighted sum of each sectorproductivity about its own structure share, because the nominal structure share of thestagnant sector will rising, so the overall productivity of the economy will be draggeddown by the declining, Nordhaus (2008) called this "growth diseas".Structural bonus brought by structural change in the stage of industrializationaccelerates the economic growth rate of the backward economies, then Baumol’s costbrought by structural change in the stage of post-industrialization slows the economicgrowth rate of the developed economies.So the economies at different developmentstages can achieve the economic growth path convergence from changes in theindustrial structure, but the economic convergence literature generally reflects aneglect of industrial structure and the trend of convergence contact. To prove thisrelationship, firstly, the paper studied the role of the industrial structure change onChina’s regional economic convergence, This paper finds that in2002-2008, China’ssix regions in general show a strong trend of economic convergence (the average annual convergence rate is1.88%). However, From the indvidual industrial level,each of them doesn’t have the same convergence trend, which shows theinter-regional economic convergence trend cannot be separated from changes inindustrial structure. Through the use of shift-share model, we found that the absenceof the role of changes in industrial structure would make the convergence rate ofoverall productivity of the six regions decline more than half each year, suggestingthat changes in industrial structure plays an important role of inter-regional economicconvergence. Then, Through Empirical analysis of the intrinsic association ofstructural change and growth convergence in East Asia "10+3" during1992-2010, wedraw the following conclusions:(1) β convergence and σ convergence do existbetween the various economies in the framework of East Asia “10+3”;(2) structuralchange significantly promotes the economic growth convergence trend of East Asianeconomies.This paper studies the relationship between the changes in the industrial structureand the convergence of economic growth, this dissertation is divided into six chapters.The first chapter is an introduction part. Firstly, this chapter systematicallyintroduces the theoretical significance and the practical significance of thisdissertation. Secondly, the chapter reviews the literature of the relationship betweenthe changes in the industrial structure and the convergence of economic growth.Then,it describes the various analytical methods used in this article: Empiricalanalysis, specification analysis, logical reasoning, historical research, comparativeanalysis, mathematical analysis; Finally, This chapter describes the innovation andinadequacy of this dissertation.The second chapter describes the structure effect theory. Firstly, the first sectionintroduces the traditional structuralist theory model, the first model is the Lewismodel based on labor restructuring, it emphasizes the growth of modern industry isthe core power to promote the economic growth;the second model is a theoreticalextension of the Lewis model(the Ranis-fee model), the model considers theeconomic growth need the coordinated development of the industrial structure, justunilaterally industrialization will lead the economies into economic growth trap; the third model is the Harris-Todaro Model, this model stresses the transfer of laborbetween industries also may result in the urban informal sector continues to expand,this may worsen the development environment and ultimately restraint economicgrowth; the fourth model is the binary model of Jorgenson,which questions thepremise of the Lewis model (zero marginal product of rural surplus labor) andconstructs a mathematical model to discuss the role of changes in the industrialstructure to promote economic growth. The second section describes new structuraleconomics, the theory emphasizes the decisive role of the endowment structure on theeconomic growth, industrial structure changes in line with the factorendowment-based will effectively promote long-term economic growth, and theindustrialization contrary to the endowment structure measures will hinder economicgrowth. Section III discusses several econometric model which measure the structureeffect.The third chapter describes the structuralist mechanism of economic growthconvergence. The first section describes the mainstream economic growthconvergence theory, neoclassical growth model predicts when economies have thesame economic variables (capital depreciation rate, the rate of technological progress,population growth rate, the savings rate), then the backward economies will have thefaster rate of economic growth to catch up with the developed economies; wheneconomies have different qualitative economic variables, then the economies far awayfrom their own steady state will achieve fast economic growth. New growth theorymodel can explain the club convergence, a convergence club which has developedeconomies and middle-income economies shows a convergence path. the divergenceclub posed by the most backward economies has shown the stagnant trend ofeconomic growth. Section II describes structural bonus, the structural changes at thisphase have a positive role in promoting economic growth, this stage is dominated bythe labor transfering from agriculture to industry; Section III describes Baumol costcaused by changes in the industrial structure, at this stage, the service sectordominated the industrial structure changes, because service sector productivity islower than industrial productivity, the transfer will reduce the productivity of the economy, The economic growth rate will be reduced.Obviously, the industrializationphase structure bonus and post-industrial stage Baumol cost makes the changes in theindustrial structure have different role of promoting economic growth,therefore,Different economies have the possibility of mutual convergence.The fourth chapter studied the role of the industrial structure change on China’sregional economic convergence, This paper finds that in2002-2008, China’s sixregions in general show a strong trend of economic convergence (the average annualconvergence rate is1.88%). However, From the indvidual industrial level, each ofthem doesn’t have the same convergence trend, which shows the inter-regionaleconomic convergence trend can not be separated from changes in industrial structure.Through the use of shift-share model, we found that the absence of the role of changesin industrial structure would make the convergence rate of overall productivity of thesix regions decline more than half each year, suggesting that changes in industrialstructure plays an important role of inter-regional economic convergence.Through Empirical analysis of the intrinsic association of structural change andgrowth convergence in East Asia "10+3" during1992-2010, The fifth chapter drawthe following conclusions:(1) β convergence and σ convergence do exist between thevarious economies in the framework of East Asia “10+3”;(2) structural changesignificantly promotes the economic growth convergence trend of East Asianeconomies;(3) structural bonus brought by structural change in the stage ofindustrialization accelerates the economic growth rate of the backward economies,then Baumol’s cost brought by structural change in the stage of post-industrializationslows the economic growth rate of the developed economies.The sixth chapter is the conclusion, it is an overview summary of the full text.