Download An Empirical Analysis on the Contribution Rate of Science &

M & D FORUM
An Empirical Analysis on the Contribution Rate of Science &
Technology Progress to Economic Growth in China
ZHANG Yefeng1, WANG Wenyin2
School of Economic & Management, North University of China, P.R.China, 610036
[email protected]
Abstract: Based on the statistical data from 1980 to 2009 in China, building broad C-D production
function model, the paper has analyzed the contribution of scientific and technological investment, labor
inputs and science & technology progress to economic growth in China. The results show that capital
investment and science & technology progress in China become a major factor in economic growth, and
some advice that the future economic growth in China still needs to strengthen science & technology
progress is put forward.
Keywords: science & technology progress, production function, contribution rate, economic growth
1 Introduction
In the Fifth Plenum of the17th CPC Central Committee has also pointed out the Twelfth Five-year
Program period is the key period to build comprehensive well-off society and is crucial period to deepen
reform and opening up and speed up the transformation of economic development mode.[1]Chinese
economic growth pattern of transformation is mainly changing from extensive growth pattern relying on
labor and capital to intensive growth pattern relying on scientific and technological progress, from the
investment-driven type to the technological progress; from technology introduction type to Independent
Innovation Technology Introduction Technology Introduction type. In addition, we are currently "second
Five Year Plan" the first year, peace, development and cooperation are still the trend of the Times in
today's world. The world multi-polarization and economic globalization has been future developed, the
world economic and political patterns have taken on the new change. The future of human beings and
the prosperity of the country are more than ever depending on the development of science and
technology. Scientific and Technological progress has become the major driver of each nation economic
growth. Therefore, it has important practical significance that this paper uses broad C-D production
function model to study the contribution of science & technology progress to economic growth in China.
2 The Model Introduction
In1928,economics professor Douglas and mathematicians Cobb in the university of Chicago has studied
and analyzed the historical data on made in USA between 1899 and 1922, and pointed out that the main
factors of the inputs in the production is to labor and capital, but the contribution of the rest of the
production factors to the output is negligible. Then they brought up the well known Cobb-Dauglas
α
β
production function in the econometrics [2] [3]: Y = f ( K , L) = AK L
Where, K and L are respectively capital and labor inputs in the production process, Y is likely to be the
maximum output. α is elastic coefficient of capital inputs, β is elastic coefficient of labor inputs. If
the sample is time series data, then C-D function will be written as the generalized production function:
Y = A0 eγ t K α Lβ
1
Zhang Yefeng (1983 -), female, postgraduate, research direction: systems engineering
Wang Wenyin (1960 -), male, Professor, Ph.D., research direction: credit management, risk management,
technological innovation management
2
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M & D FORUM
Where, A0 is the technical level in the base period, t is the time variable.
γ
is the average annual
γt
growth rate for the technology. A0 e Reflects the influence of technological progress to output, and
A0
、γ
is the parameters for to be estimated.
3 Model Building, Estimation and Parameters Test
Most countries or regions still use GDP index at the present [4]. So this paper selects GDP as measuring
the index of our country economic outputs, written as GDP. According to the related calculating method,
it fits the actual situation to put all the social fixed assets investment each year as capital inputs [5]So this
paper selects all the social fixed assets investment as capital inputs index, written for K. The statistical
classification of our country to labor category is referenced to statistical classification of each market
economic countries and to establish labor market statistical system which adapts to the situation of our
country's labor market development. Currently our country’s Labor market scope is constantly changing.
[6]
Therefore, this paper selects total number of employed persons at the end of year employment as labor
inputs index, written as L. The sample data of this paper is the annual data in 1980-2009, a total of 30.
The both sides of generalized C-D production function take logarithm:
LNGDP = LNA0 + γ t + α LNK + β LNL + µ1 .....(1)
According to the data the annual data in 1980-2009, we use Eviews6.0 software to take least squares
estimate with (1) type:
ˆ = −5.012370 + 0.036276 × t + 0.536745 × LNK + 0.901683 × LNL+µ
LOG(GDP)
1
（t value） （-1.826494）（1.922392） （3.520970）
2
（5.324453）
2
R =0.996404 R =0.995989 F=2401.533 S.E=0.086714 D.W=0.453043
2
When model goodness of fittest R is high, F value is high, and variance Var ( β j )of each regression
（ ）
parameter estimation is very large (ie, t value is very low),this shows there may exist the
multicollinearity in explanatory variables .[7] The estimation above meet the case, and T test of C value
and T value didn't pass, so explanatory variables LNL and explanatory variables LNK may exist
multicollinearity. We found the correlation coefficient between explanatory variables LNL and LNK
reached 0.946029, and can judge exists serious multicollinearity. This may be one reason that test of C
value and T value didn't pass. So model needs to be amended to eliminate multicollinearity.
4 Model Modification
We can use per capita GDP(GDP/L) and per capita (K/L)to eliminate multicollinearity in the state of
constant returns to scale( α + β = 1 ).Whether the specific problem of investigation can exert constraint
conditions or whether the constraint model directly exert regression, we will also carry out the
corresponding test. In Eviews software, Wald test is usually used. [8]Wald test is to determine whether
fitting results meets the constraint condition of the coefficient ,that is, whether meets - 1 + C (3) + C (4)
= 0.
The following is to use Wald test for logarithmic constrain test. The null hypothesis of the test is C (3) +
C (4) = 1 (see table 2)
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Table2 Wald test output results
Wald Test:
Equation: EQ04
Test Statistic
Value
df
Probability
F-statistic
Chi-square
2.773277
2.773277
(1, 26)
1
0.1079
0.0958
Normalized Restriction (= 0)
Value
Std. Err.
-1 + C(3) + C(4)
0.438429
0.263271
Null Hypothesis Summary:
Restrictions are linear in coefficients.
P value of the test from the table3 is 0.1079 and greater than the one in a = 0.05 significant level, so to
accept the original hypothesis, namely to meet coefficient constraint condition. The constraint regression
model can be thought to have the same explanatory as the original model under the constraint of - 1 + C
(3) + C (4) = 0. Thus to eliminate multicollinearity and establish the model as follows:
LN ( GDP / L ) = LNA 0 + γ × t + α × LN ( K / L ) + µ2 ............... ( 2 )
Use Eviews6.0 software to make least-square estimation can get the following estimation equation:
LOG (GDPˆ / L) = −0.490726 + 0.052756 × t + 0.492809 × LOG ( K / L) + µ2
（–1.193250）（3.180783） （4.906596）
(t value)
2
2
R =0.994662 R =0.994266 F=2515.423 S.E=0.089517 D.W=0.354553
F test passes in a = 0.05 significant levels and it shows that model is overall significantly established.
R 2 = 0.994266, and it indicates that the model = goodness of fittest is better, but T test of C value and T
value didn't pass, DW value is low and only 0.354553 low value. Therefore, we can judge that it may
exist sequence autocorrelation and need to re-correct model to eliminate sequence correctional.
5 The Revised Model Again
The first order and second order autocorrelation of the model are respectively tested, and found that
model exists first order and second order autocorrelation according to accompanying probability. So
build
the
following
correction
model:
LN (GDP / L) = LNA0 + γ × t + α × LN ( K / L) + AR (1) + AR(2) + µ3 .........(3)
So use Eviews6.0 software and generalized differential estimation model to estimate the model and
result is as follows:
LOG (GDPˆ / L) = −1.130482 + 0.077569 × t + 0.336173 × LOG ( K / L) + 1.287617 × AR(1) − 0.525327 × AR(2) + µ3
(t value)
–2.422156 4.022471 3.012227
6.523756
(–2.812903)
（
2
）（
）（
）
（
）
2
R =0.998446 R =0.998176 F=3694.738 S.E=0.047741 D.W=1.721212
The model hasn’t exist first order and second order autocorrelation based on LM multiplier test
、
2
judgment. T test of C value T value and LOG(K/L) has passed in a=0.05 significant level. R =
0.998176,it shows regression equation to the sample data fitting is better, explanatory variables and the
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dependent variables are highly linear correlation. F test has significantly passed and improved. White
test (table5) test shows its P values is greater than 0.05, then accept there isn’t assumptions of
heteroskedasticity assumptions, think model does not exist heteroskedasticity. Therefore, we can say
model is through the econometrics test.
Table5 White test results
Heteroskedasticity Test: White
F-statistic
Obs*R-squared
Scaled explained SS
1.562003
17.56064
22.56666
Prob. F(14,13)
Prob. Chi-Square(14)
Prob. Chi-Square(14)
0.2143
0.2275
0.0677
α = 0.336173 , β = 0.663827 , γ = 0.077569
GDP = 0.322878e0.077569t K 0.336173 L0.663827
The above results show that,
.Therefore, the
standards of the model is:
Among them, α = 0.336173 ,it indicates when capital inputs grow 1% and it can lead to its GDP
grows 0.336173%. β = 0.663827 ,it shows labor inputs increase by 1%, and it can lead to its GDP
grows 0.663827%. γ = 0.077569 ,it reflects the annual growth rate of the technological progress in
China is 7.7569%.
6 Calculation and Analysis of Each Element
、
The contribution rate of capital inputs labor inputs and technological progress is respectively:
∆K
E ( K ) = α K × 100% , E ( L) = α
∆Y
Y
∆L
L × 100% , E ( A) = 1 − E ( K ) − E ( L)
∆Y
Y
The results of the contribution rate of each element is seeing figure1 as follows:
Figure1 The figure of the contribution rate of each element
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、
As can be seen from Figure1,capital inputs labor inputs and technological progress become the major
factor of Chinese economic growth one after another. There is little change in the contribution of labor
inputs. The world economy is in a recession by the 2007 U.S. subprime mortgage crisis affect, each
country rescue the market. The plan is to inject in china and stimulate domestic demand by capital .So
Chinese capital inputs have increased dramatically from 2007 to 2009, which caused the contribution
rate of science and technology progress dropped sharply negative. The contribution rate of labor inputs
decreased slightly in recent years, employment increased slowly, the number of employment in recent
years significantly declined .It reflects a large number of workers laid off because of technological
progress in keeping the economic growth in China, The laid-off is mostly because of the economic
recession in the last three years.
7 Conclusions and Recommendations
From 2007 to 2009 Chinese economic growth recession and contribution rate of the progress of science
and technology had such a large fall, which fully explains our future economic growth must still
continue to accelerate the progress of science and technology. According to this, put forward the
following suggestions: (1)Chinese R D funds is 5802.1 billion yuan, accounting for 1.7% of GDP.
While developed countries accounting for 3% ~ 5%of its gross domestic product. Therefore, China
should continue to increase R D inputs, on one hand we should continue to increase the government's
inputs in science and technology, on the other hand we should encourage and guide the enterprises to
increase investment in science and technology and strengthen scientific research cooperation of
enterprises, scientific research institutions and universities to make their full advantages. (2) To improve
education level
pay great attention to the human capital accumulation and play the role of human
capital. The decisive factor of long-term economic growth in national of is knowledge and human
capital accumulation such as some endogenous factors. China is the country which has the most
abundant human resources in the world, but human resources must combine with the education to
improve the laborer quality. China should actively introduce high-tech talents, this makes Chinese
population become human resources of Chinese economic growth. (3) The digestion and absorption of
technology, and strengthen the ability of independent R D and innovation. China has been known as a
manufacturing power and production workshop in the long term, which fully testifies Chinese imitate
ability is too strong, but the innovation ability is relatively backward. The successful experience in
Japan and South Korea is the technological introduction and digestion and absorption as soon as
possible, this is basically they also increase the input of digestion and absorption at the same time. (4)
Perfect market economic system to promote enthusiasm and initiative of science and technology
innovation. (5) Perfect intellectual property protection and increase personnel's reward of science and
technology innovation
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References
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http://www.gov.cn/ldhd/2010-10/18/content_1723271.htm.
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