Knowledge Capital And Technology Spillovers On The Growth Of China’s Total Factor Productivity

This thesis is intended to study the effect of research and development (R&D),human capital, technology spillovers and technology absorption on the total factorproductivity (TFP) of China from both national and regional perspectives.Since the1980s, China has witnessed robust growth. While there is quite a lot ofresearch on factors contributing to economic growth, few are devoted to the realm oftechnological progress. Inconsistent estimation of China’s TFP has rendered makingconclusion of whether technological progress in China exists impossible.Through detailed recalibration of key factors, this study estimates both the nationaland regional TFP. Models are built with variables including technological capability (aneconomy’s R&D, human, technology import capital), international (trade andinvestment) and regional technology spillovers as well as technology absorption (i.e.how is the economy’s technological capability going to affect its absorption ofspillovers). With national model having non-stationary time series, cointegrating vectorsare used to estimate long-run relationship among variables. Regional variable interceptpanel data model is estimated by feasible generalized least square method. Due toexistence of unit roots, generalized method of moments is employed.The estimation results yield important implications. There is sustainable growth forChina’s national and regional TFP leading to economic development. Technologicalcapability has promoted TFP growth with human capital having the greatest effect.R&D has larger effect than technology import in regional level. For internationaltechnology spillovers, the effect of foreign direct investment (FDI) is positive in bothlevels. Positive effect of machinery import and total export is apparent in national andregional level respectively. Given a relatively large coefficient of regional spillover, itcannot be ignored by policy makers. Finally for technology absorption, larger R&Dstock improves the nation’s absorptive ability of machinery import spillover whilelarger human capital allows regions to better absorb regional spillover. Yet only withlarge enough human and R&D capital can FDI spillover be positive.