The Study Of The Effect Of China Factor Misallocation Between Regions On Potential Economic Growth Rate

Potential economic growth rate is the growth rate when the resources is made of full use and reach the optimal allocation. It is a long-term trend, while the actual growth rate is the short-term behavior of economic development. China's actual economic growth rate came to decline from the beginning of 2010. According to the economic growth theory, there are two reasons to explain the decline of real economic growth rate. One is caused by the decline of potential economic growth rate, the other is caused by the loss between the potential the real growth rate. The potential economic growth means maximum output capacity, determined by the supply side factors, such as labor, capital, resources and productivity, while the growth loss is determined by the level of investment, consumption and export which belongs to demand factors. Therefore, it's significant to distinguish and analyze the reason of economic decline. Based on this, this paper study potential economic growth rate from the perspective of factor misallocation between regions, estimate the loss of output and growth rate caused by the misallocation. It has important theoretical significance and practical application value to optimize the allocation of capital and labor and enhance the level of potential output and the potential economic growth rate.This paper initially reviewed the related literatures about potential economic growth rate and factor misallocation at home and abroad. Based on the definition and connotation of the potential economic growth rate, the paper analyze that factor misallocation how to influence the potential economic growth rate. Based on the theoretical model and macroeconomic data of 1978 until 2014 years, the paper measured the degree of factor misallocation and the loss of output and growth rate. Empirical results showed that the Eastern is the least in the degree of capital and labor misallocation and the loss of output and growth rate, while the Middle and Western area is better, Northeastern' problem is the most severe. Factor mismatches make actual output decrease by 2.35 percentage points in average and growth rate decrease by 0.38 percentage points. Factors allocation between regions reaches optimal allocation structure lead to the potential output decreased by 4.42 percentage points to the most,1.26 percentage points to the least and 2.36 percentage points in average. But on the whole, the extent of the increase of potential output is decreasing, which leads to the decrease of the extent of the potential economic growth rate. But capital and labor misallocation caused the loss of potential output and growth rate, so it's efficient to increase the potential output and growth rate by optimizing factor allocation structure.