Capital-labor Elasticity Of Substitution And Industrial Upgrading

In the long run,the world economic globalization belongs to the historical trend.The progress of technology makes a new factor of production change in social division of labor: the arrival of robots.Such automated,intelligent and virtualized production factors have changed the traditional labor model,making labor cost continue to decline in importance and relying on resource-intensive accumulation of raw wealth increasingly unreliable.Cloud production and close-proximity supply may become the mainstream,the flow of goods decreases,the flow of services becomes the mainstream,and the traditional trade structure changes.This changing environment inevitably requires that regions,industries,enterprises and individuals themselves make changes to adapt to the changing environment.How this adaptability affects economic transformation and industrial upgrading,and what is used to measure the ability of industry to adapt to change ability is both an interesting and important issue.The basic definition of the elasticity of capital labor substitution indicates that it can be used to measure the strength of the industry's adaptability.Elasticity of capital labor substitution is a parameter with practical significance and important influence on economic growth.From a macro perspective,the elasticity of capital labor substitution measures the economic flexibility of a region or industry.From a micro perspective,the elasticity of capital labor substitution measures the sensitivity of a company or manufacturer to changes in the economic environment.De La Grandville Hypothesis holds that the elasticity of capital-labor substitution has a significant positive effect on economic growth.Other conditions being the same,the greater the elasticity of capital labor substitution,the faster the economic growth.economic growth is divided into the growth caused by factor accumulation and the improvement of total factor productivity.Based on whether the increase of the elasticity of capital-labor substitution has a positive effect on the change of total factor productivity,this paper tests De La Grandville Hypothesis.The regression results show that the De La Grandville Hypothesis also applies to industrial upgrading.This article use the data from Chinese Annual Surveys of Industrial Production(ASIP)during 1998 to 2007.we use fixed effects of nonlinear least squares method to estimate the substitution terms of industries,substitution of sectors.Our analysis indicated that(1)the greater the labor-capital substitution terms are,the higher the total factor productivity of the industry is(2)the labor-capital substitution terms of service industry is far higher than the labor-capital substitution terms of manufacturing,this proved from the perspective of the labor-capital substitution terms that increasing proportion of service industry output value in the national output will speed up the economic growth(3)from the point of manufacturing industry,the labor-capital substitution terms of sectors fluctuates greater than the labor-capital substitution terms of industries.Some labor-capital substitution terms of sectors is far greater than 1,it shows: Not only the industrial upgrading among major industries(increasing the proportion of service industry)will lead to rapid economic development,but also industrial upgrading in major industries will do.We should focus on the structural upgrading among industries and pay attention to the layout within industries.