Embodied Technical Change,Equipment Investment And TFP Growth

Technical change can be distinguished into: disembodied technical change and embodied technical change (ETC) . Disembodied technical change is related with optimizing deployed materials, or improving of efficiency. And embodied technical change is the improving or progress in capital quality, including new inventions. Technical change embedded in capital, is an important mode of a country's (especially the backward country) technical change. In this paper we apply the extended ETC growth model to measure the growth rate of total-factor-productivity (TFP) of China's nonagricultural sector and NIEs. This paper finds the contribution of embodied technical change (ETC) to economic growth is 20.37%, and to TFP growth is 63.91% in 1980-2000. I also find that ETC promoted approximately 24.25% of economic growth and contributed 53.9% of TFP growth in NIEs. The aggregated contribution of equipment investment and ETC to China and NIEs is nearly 46.27%.These results indicated that embodied technical change and equipment investment are important sources of China and NIEs' economic growth. The research also suggests that to realize the sustainable economic growth, China should improve the structure of capital investment and augment the input of efficiency equipment embedding with the latest technology.