The Contribution Of Economic Structural Change To TFP And Economic Growth In China

The discussion of economic transformation and development has never stopped in China. Economic transformation and development can only be achieved by the joint effect of industrial upgrading and structural change. Therefore, structural change is crucial to the success of economic transformation. Although China has maintained a rapid growth since the initiation of the reform, potential structural contradictions have become key factors restricting China’s economic growth. Hence studies on economic structural change are exactly in line with the current economic situation, and also have important significance for economic transformation and the balanced development between urban and rural.Economic structural change has always been a mainstream topic among economists. Although many studies have been done in this specific field, most of them are focusing on the dynamic mechanism of structural change from the perspectives of supply and demand, as well as measuring the impact of structural change on productivity. But contributions of structural change to economic growth are rarely involved among those studies. Differs from previous studies, attempts to analyse the contribution of economic structural change on China’s economic growth. In order to examine the impact of input factor redistribution on economic growth, capital and labor as two kinds of inputs are taken into, and set inputs share as economic structural change variable.Firstly, this paper reviews related literatures about economic structural change. The theoritical literatures introduced in this paper mainly focuse on the dynamic mechanism of structural change from perspectives of supply and demand, and the empirical research mainly focuss on measuring the contribution of structural change on productivity using share-transfer method. Secondly, this paper analyses China’s industrial structure using output and employment data, and also compares China’s industrial structure with developed countries, neighboring countries and other members of the " BRICS". This paper advocates that China will experience a long-term process of structural change in the future. Thirdly, this paper splits the economic growth rate into four parts by setting the inputs shares, namely contribution of weighted average capital growth, contribution of weighted average labor growth, contribution of weighted average TFP growth and the Structural Change Effect. Structural Change Effect can also be split into Capital Structural Change Effect and Labor Structural Change Effect. Finally, data from 15 industries are selected as samples, in order to verify theoretical model constructed in this paper by using Stochastic Frontier Analysis method with input and output data from 1993 to 2012. The empirical results indicate that factor accumulation on average accounts for 62.57% of GDP growth in China, of which capital growth accounts for 55% of economic growth and labor growth accounts for 7.57% of economic growth. Weighted average TFP growth could explain 39.6% of GDP growth, and the contribution of TFP growth shows an upward trend before 2000, however a downward trend after 2000. The Economic Structural Change Effect is-2.16%, because both Capital Structure Change Effect and Labor tructure Change Effect are negative during 1997-2003, indicating that capital and labor flow out of high productivity industries in this period.