Applied Study Of Endogenous Economic Growth Theory And Structural Equation Model

Based on endogenous growth theory, this study takes advantage of Linear Structural Model empirically analyzing the panel data of China, aiming at determining the applicability of endogenous growth theory on China economy and the applicability of Linear Structural Model on economics study. This dissertation respectively uses some observed variables to measure three exogenous latent variables, including material capital, human capital and technique, and one endogenous latent variables-economic growth. Then we estimate the interactions between these three factors with economy growth and among these three factors. The result of this empirical study shows that, the interactions between three factors and economy growth are consistent with the main idea of endogenous growth theory at the first stage, and the interactions among three factors are consistent with the idea of Romer and Lucas. In conclusion, the result of this empirical study validates the applicability of endogenous growth theory on China economy and the applicability of Linear Structural Model on economy study.We get three main conclusions from this study: Firstly, human capital, material capital and technique positively affect economic growth, which means capital and technique accumulations are able to enhance economic development. Among the affects of these three factors, material capital ranks No1, while human capital and technique come to heel. Secondly, the measured effects of three industries rank as the Third Industry, the Second Industry and the First Industry, which means the economy of China has derived from traditional agricultural economy and enters into modern industrial economy, and has improved a lot in the wave of information economy and service economy. Thirdly, there exist interactions between capital and technique. The empirical result proves the endogenous of technique, which means the endogenous economic growth theory fits for the study of Chinese economy.The Innovation of This StudyFirstly, the innovation of this study is mainly in the method used. Based on endogenous growth theory, this study gives up the traditional measure used in former empirical research about the origin of economic growth, which always took some indicators as direct dependent variables or independent variables. The factors on researchers pay much attention, such as human capital, real capital and technique, are almost unobservable and difficult to be replaced just by indictors directly. Therefore,we try to introduce SEM, which allows to use some indictors to measure the factors referred above to discovery the inner connections among endogenous latent variables and exogenous latent variables. The advantages of use of SEM are not only at its smaller measured error in measuring economic growth, but also at its testing and searching effects in detecting the interactions among measured variables.Secondly, the result of this study also contains some new discoveries. At some extent, the result of this study proves not only the applicability of endogenous growth theory in China, but also the applicability of SEM in economic research. The result shows that, the greatest factors of enhancing economic growth are human capital and real capital, but not the technique, which is consistent with the main idea of endogenous growth theory in its first stage. The result also proves the technique to be endogenous but not to be exogenous, which is fit for the kernel idea of endogenous growth theory. And what's more, the analysis and economic meaning prove the applicability of SEM in economic research.