An Empirical Analysis On Total Fator Productivity Of China’s Service Industry

With the sustained rapid growth of Chinese economic output and the improvement of per capita income level, China’s service industry has maintained a rapid pace of development from the seventies of the20th century. However, compared with the countries that are in the similar level of development, the overall development of service industry is still lagging behind, which restricts the transformation and upgrading of the industrial structure. According to the economic growth theory, factor accumulation and productivity are the two main sources of output growth. Subjected to resource constrains, factor accumulation can not bring sustained growth, are only the productivity increasing is the inexhaustible motive force for economic growth. Well, examining the developing and the regional differences in China’s service industry from the viewpoint of TFP has been the purpose of this article.This paper calculates and analyzes the growth of the total factor productivity of Chinese provinces and three regions from the year2000to2012, using the stochastic frontier analysis in the translog input distance functional form that allows decomposing total factor productivity change into technological change, technical efficiency change and scale efficiency change. The results show that the total factor productivity of service industry of China and three regions exhibits a "W"-type process of evolution. The average TFP change rate of China’s service industry is about3.43%over the observed period, in which there is an overall negative technical efficiency change of about-1.54%on average, and the average annual growth rate of technological change and scale efficiency change is4.50%,0.52%respectively. In the years2000-2012, accumulation of technological change shows a slow upward trend, increased by about54%. Scale efficiency change is relatively stable, and accumulation of scale efficiency change has been increasing by6%. The accumulation of technical efficiency change shows a decreaing trend, and The accumulation of TFP grows about41%. And then this paper tests the convergence of total factor productivity of service industry. The results show that TFP of service industry of China exhibits conditional convergence, and only the eastern region and the central region exhibits absolute convergence. Because of the existence of the gap of the regional development, it is necessary to analyze the influential factors which interfere the TFP of service industry. This paper uses the GLS method to examine some influential factors on the TFP of China’s service industry. The results show that local financial expenditure has a positive and significant impact on the TFP growth of China’s service industry; foreign trade and the industrial degree have a positive and insignificant influence on the TFP growth; however, the level of urbanization has a negative and significant impact on the TFP growth of China’s service industry.This study has the following innovations:first, this paper combines the input distance function and stochastic frontier analysis to analyze the total factor productivity of China’s service industry; second, the existing literatures, which use the stochastic frontier analysis to analyze the TFP growth, are basically decomposing total factor productivity change into technological change and technical efficiency change. However, this paper are decomposing total factor productivity change into technological change, technical efficiency change and scale efficiency change; third, according to the conclusion, both the total factor productivity and technical efficiency change of China’s service industry exhibit a "W"-type process of evolution from the year2000to2012.