The Coal Industry Development Model Based On The Production Function And Cost Function Studies

This paper outlines the development of China's coal industry and current status of China's coal industry development will be divided into three stages, and describes the main features of each stage. In addition, the paper gives a new perspective of analyzing coal industry from industry chain and the relationship between supply and demand.Then, based on the investment in fixed assets of coal industry, the paper estimates capital stock data. Combined with coal production, and employment data, the paper uses the trans-log function to estimate the coal industry production function through the period of 1990-2006.There are two main basic features in coal production in China:(1)excess capacity, the existence of capital idle; (2) technological progress and labor on the coal industry's contribution to the larger yield. This article then analyzes the basic causes of overcapacity in coal industry and offers the policy makers with a range of possible policy recommendations, such as job security, to avoid over-investment, to increase industry concentration and technology investment.In the production function, the paper derived China's actual trend of the marginal cost function under the assumption that there is adequate supply of labor in the coal industry. The article finds that the marginal cost of China's coal industry since 1999 show a downward trend, and after 2002,there are signs of the inflection point of drop-rate slowing down.By comparing the marginal costs and coal price changes in relations,this paper gives several solutions to the coal demand and supply policy measures:(1)increases remuneration for the protection of employment; (2) moderately increase coal prices, and the government grants subsidies to the downstream thermal power mode manufacturers;(3)the implementation of vertical integration.