Study Of Value Added Rate Based On The Total Output Production Function

The State Council issued "industrial transformation and upgrading plan(2011-2015)," It is the first time that the government metioned that industrial added value to be monitored as an actual index.and put forward the goal in “twelfth five-year plan” that the total industrial output grew by an average of about 8%, industrial added value rate is increased 2% compare with the end of the "11th five-year plan". “Made in China 2025” will increase the manufacturing value added rate as one of the core objectives of improving the quality and efficiency of China’s manufacturing industry, but as an indicator to measure the quality of economic growth, Value added rate has shown a lot of questions. Value added rate(VAR) is the proportion of the value-added(GDP) and total input(Contains value added plus intermediate input). This index is more in line with the logic of accounting, statistics, and management than the total factor productivity in measuring the quality of economic growth., it reflects the input and output efficiency, the higher the value, the higher value-added businesses, the higher the level of profitability, the better the effect of the input and output.Therefore, his paper discusses the index’s change rule and evaluation, to objectively evaluate the quality of industrial development level and predict policy implementation effect, this have important practical value and broad application prospects.By building up a theoretical model based on the total output of the production function, the paper obtained the following main conclusions:Firstly, Value added rate reflects the quality of economic growth dynamicly. This paper through a gross output model find out the relationship between VAR and the quality of economic growth, that the VAR can reflect the quality of economic growth, but it is not in the simple way that the greater the better. there exists a threshold level(TL-VAR), and it varies considerably in different countries. In the same region it can also be varied at different times. As a result, we should take full account of its effects while comparing economic growth quality by using VAR index. when the real VAR is below the TL-VAR, the larger the better. However, once the real VAR is above the TL-VAR, it means that the larger VAR does not represent the higher quality of economic growth. the TL-VAR is associated with the depreciation rate, population growth rate, saving rate and other macroeconomic indicators. In order to increase China’s TL-VAR to achieve higher quality of economic growth, we need to expand domestic demands for the purpose of reducing the saving rate, to adjust family plan policy for the purpose of ensuring the rate of population growth, to improve the industrial level and to expedite the elimination of over-production capacity for the purpose of accelerating depreciation.Secondly, The existence a weak link of substitution between intermediate inputs and initial inputs. we can see from the calculation that VAR is 1 minus intermediate inputs rate. So as a kind of capital, intermediate inputs play an important role that cannot be ignored in the process of production. Their coefficient size reflects a country’s economic growth mode. Current mainstream economic growth theories only consider the value added production function, rather than gross output production function, thus ignoring the role of intermediate inputs in the production process and the evaluation of economic efficiency. This paper is based on the statistical characteristics, basic model and empirical test of the basic paradigm. From the perspective of statistical characteristics, China’s intermediate inputs coefficients are significantly higher than that of U.S. and Japan and other developed countries.Fianly,In the end, the value added rate is partly related to the multi index system of the quality of economic growth. This paper studies the OECD national data, Found that, first, the difference between industry largely determines the level of VAR, It is more obvious on the industry level, So there will be continued VAR change occurs in a country or region when industrial restructuring; Second, there is both consistency and contradiction between VAR and the indicators that reflect innovation, coordination, open, shared and environment. Such as intermediate investment in research and development expenses and VAR are in inverted U shape; VAR does not reflect the degree of resource protection; A higher proportion trading can improve the overall added value rate; VAR dose not reflect fairness. Third, the relationship between the TL-VAR and VAR reveals the overall macro-level changes in the factors of depreciation rate, population growth and other macroeconomic indicators.