A Comparative Study Of Factor Price Distortions Between High-tech Industries And Traditional Manufacturing

Reform has always been an important issue of Chinese economic growth.The Chinese government still has the power to allocate resources,and the reform of the factor market has been slow.The price of production factors has long deviated from their actual value and has been in a state of negative distortion for a long time such as labor price,capital price,and land price.Factor market distortions inhibit economic development.Manufacturing is the foundation of economic development,and it's an important part of a country's core competitiveness.The high-tech industry has a special historical mission in the context of "Made in China 2025".It is of great practical significance for the development of manufacturing industry to analyze the causes,distortions and impacts of factor price distortions in sub-sectors,and to summarize the commonalities and characteristics.Firstly,the definition of factor market distortion,its causes and its impact on industrial development are sorted out through literature review.This paper defines the concepts of high-tech industry and traditional manufacturing industry,and compares the development stages and current situation of these two industries.The study finds that there are three main reasons for market distortions in China:1.government intervention in the market;2.unclear property rights system;3.endogenous problems.The distortion of factor market has caused some problems,such as low innovation efficiency,difficult transformation and upgrading of manufacturing industry,low production efficiency,excessive capacity,sub-optimal export choice and so forth.Secondly,the data collected from high-tech industry and traditional manufacturing industry are used to estimate the distortion degree of factor prices in the 22 years from 1995 to 2016 by establishing the Cobb-Douglas production function model.The empirical results show that the labor factor market of high-tech industry is always in a positive distortion state,while its capital factor market has changed from positive distortion to negative distortion.The capital factor market and labor factor market of traditional manufacturing industry are in a state of negative distortion.By studying the sub-industries of high-tech industry and traditional manufacturing industry,it is found that there are negative distortions in labor factor market or capital factor market in other industries except in aviation,spacecraft and equipment manufacturing.The empirical research of the article confirms that the domestic factor market is in a negative distorted situation.At the same time,it analyzes the reasons for the distortion of the market factors of the subdivision industry.Finally,we hope that the government decentralization and reform of property right system of state-owned enterprises to stimulate the vitality of the market.The distortions of capital factor market can be corrected by lowering the access threshold of financial market and opening up more investment fields.The distortion of labor factor market is corrected by reforming the household registration system and strengthening the training of labor force skills.Breaking industry monopoly and protecting intellectual property rights can stimulate the innovation power of enterprises.These can realize the transformation from Made-in-China to Created-in-China.