Analysis Of The Dominant Facotrs Of China's Economic Growth: 1978-2007

From the reform and opening-up in 1976 to 2007, china had been increasing in a high speed of 9.8% per year in average. Facing the amazing growth rate, we may be interested in several questions: How much was the contribution rate of all the factors, such as technology progress, physical capital, human capital, raw labor and so on, to China's economic growth? What were the typical characteristics of the current stage of China's development? Was the economic growth in China sustainable? And how can we keep the high speed of economic growth? The answers to these questions will be meaningful either in theoretical study or in empirical analysis.This paper began with a derivation of a theoretical model. Since R&D need not only a lot of human capital, but also plenty of physical capital, and this will crowd out the resources which was used in final product sector, furthermore, higher technology progress come from more endowment of resources, technology progress is endogenous beyond all doubt.A modified version of Romer's endogenous model and Jones'R&D based model was developed in this paper. The conclusion was: At steady state, the growth rate of output per capita depends on the parameters of R&D sector's production function, final output sector's production function and the growth rate of population.Before the empirical analysis, the calculation of human capital stock and physical capital stock are needed. Based on the comprehensive consideration of all kinds of methods which were used in calculating human capital stock, we took Barro & Lee's method. We found that the average education attainment had reached a level of 8.4 year in 2007 from 4.6 year in 1977. The calculation of physical capital was divided into two phases. The quantity of national income accumulation was used to represent the investment during 1978-1984, and the total investment in fixed assets was used to represent the investment during 1985-2007. At last, we perform a perpetual-inventory method to calculate the physical capital during 1978-2007.Through ADF test, GDP, physical capital stock and human capital stock were all approved to be I(1) process, furthermore, the residual of the regression was serial correlation. After the correction of the serial correction, we found that all the variables were co-integration. The hypothesis of constant returns to scale was tested at the same time. The conclusion is: The Cobb-Douglas Production function which was used in this paper satisfied the hypothesis of CRS. The estimator ofαwas 0.78. Based on the estimation of the production function, the growth rate of TFP in china was 0.33% in average. The economic growth had been driven by physical capital accumulation of 86.7% during the past 30 years. But the contribution of average education attainment, raw labor and TFP was only 4.8%, 5.2%, 3.3% respectively. This result told us that the economic growth in China had been driven by investment all through.At last, a comparison of the development process of"Newly Industrial Economies"was carried out and we found that all the economics would experience a physical capital deepening process for a long time at the primary stage of development. This process was an impassable stage and the preconditions of human capital and technology progress to play a more important role in economic growth. But through the analysis of the theoretical model and the development process of the U.S.A. and Japan, we concluded that China must intensify the devotion of education and R&D to keep the sustainable economic growth.