Which Factors Contribute To The Growth Of TFP In Petro-chemical Industry?----An Empirical Analysis In The Open Economy

The previous TFP-related researches mainly focus on China or regional area, rather than in industrial level. Petrochemical industry takes1/6of total industrial output, highly relies on oil, includes several processing segments and marvelous product categories, and affects SEIs (Strategic Emerging Industries) in terms of many aspects, which make petrochemical industry a crucial sector of China’s economy. Thus, it’s necessary to dig into the technology level of petrochemical industry and the factors which may influence Total Factors Productivity (TFP), and this is just why this paper makes sense.In this paper, methodology of calculating TFP is Cobb-Douglas Production Function. We calculated TFP of all manufacturing industries from1995to2010and3different hypothesis was made:1. The elasticity of output with respect to capital maintains the same in16years among all industries,2. The elasticity of output with respect to capital maintains the same among all industries in the same year, but different among years,3. The elasticity of output with respect to capital for each industry remains the same during16years, but different among industries. The comparison shows hypothesis3is more reasonable than the other two. Also, we get TFP of34sub-industries in petrochemical industry from1999to2007and provincial TFP of1999to2010. We try to probe the mechanism of TFP growth, in another word, the major factors that seem to explain the growth of TFP, mainly the correlation of openness of economy and TFP. We reviewed the measurements of openness in chapter2and use3indexes in chapter4to conduct regression, and the conclusion is Rate of Trade Dependency is the best measurement. Then, take economy structure, R&D expense, labor cost, material cost, exports and FDI inflows into consideration and make panel data analysis, in order to know which factors affects TFP more. We get:1. Openness shows positive relationship with TFP,2. TFP’s central driving forces are an ongoing opening economy, higher cost of labor or raw material, while level of R&D show negative relationship with TFP,3. TFP of East China is mainly driven by human capital accumulation and export demand, then price of raw material and share of FDI, meanwhile share of SOE show negative relationship with level of TFP; TFP of Central China is basically driven by cost of material, export demand also contributes to the raise of TFP, meanwhile share of SOE and share of FDI both negatively affect TFP; TFP of West China is mainly affected by degree of openness, then cost of labor and material, share of SOE, while export demand and share of FDI degrade level of TFP.As to the suggestions, besides deepen the degree of openness, on the one hand, it’s more effective and necessary to improve the efficiency of capital and labor force, develop private sector and encourage private capital to be invested in petrochemical industry, and promote marketization; on the other hand, invest more in R&D and concentrate on the "general policies" which seems more effective than specialized "industrial policies" in developed and emerging economies, thus the government should take efforts in supporting R&D activities, promoting human capital accumulation (such as improvement of higher education), protecting intellectual property, etc..