Download An Empirical Study on the Interaction Between Economic Growth

M & D FORUM
An Empirical Study on the Interaction Between Economic Growth
and Industry Structure in Service Industry in China
SONG Yingjie1, LV Cuicui2
1. Economic College, Shandong Institute of Business and Technology, China, 264005
2. College English Teaching Department, Shandong Institute of Business and Technology, China,
264005
Abstract: The development of service industry should not only take economic gross of service industry
into consideration, but also pay more attention to its structure of development. Through optimization of
internal industry structure in service industry, service industry will serve as a lubricant for the smooth
operation of our society. This thesis, through empirically selecting related data from 1978 to 2009 in
service industry in China and constructing entropy index, makes an evaluation on structure features in
service industry and then makes use of logit model to empirically analyze the relationship between
industry structure and gross growth in service industry. According to the result, the growth of economic
gross in service industry is the important driving force for the diversity of industry structure. Meanwhile,
due adjustment should be made towards the inducement which may lead to structural diversity.
Keywords: Service industry, Industry structure, Entropy index
1
Introduction
The development of service industry is an important indicator that measures a nation or region’s degree
of production socialization and level of market economic development. Meanwhile, it is the main
impetus of economic growth in developed countries. After the reform and opening up policy, the total
amount of service industry in China has witnesses a tremendous increase and changes have also take
place in its growth structure which transforms from the single living service industry growth to diverse
multi-level service industry growth. The development of service industry should not only take economic
gross of service industry into consideration, but also pay more attention to its structure of development.
Through optimization of internal industry structure in service industry, service industry will serve as a
lubricant for the smooth operation of our society. Previous researches have focused on the increase of
total amount of industry and the corresponding solution, but few studies concern its internal structure, i.e.
the influence of the interaction among industries such as logistics industry, wholesale retail, lodging and
catering, finance and real estate, etc on the overall growth of industry. This thesis, through empirically
selecting related data from 1978 to 2009 in service industry in China and constructing entropy index
makes an evaluation on structure features in service industry and then makes use of logit model to
empirically analyze the relationship between industry structure and gross growth in service industry. The
study attempts to provide decision-making basis for the promotion of optimization of resource allocation
in service industry in China and the implementation of related policies for the government.
The outline of the thesis is as follows: the second part explains the calculation method of entropy index
of the primary industry and then calculates the entropy index from 1978 to 2009; The third part
estimates the impact of the growth of service industry on entropy index and then draws the final
conclusion.
，
2
Index Construction and Data Collection
2.1 Constructing entropy index of the service industry structure
Entropy index can describe the change of proportion in various components in the total amount. For a
simple and gigantic system composed of n subsystems, we attempt to see whether the system bears the
feature A and the total amount is X. The measure value of each subsystem is Xi and its contribution to
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the total amount is s i = X i / X . Then the entropy index is:
n
D
A
= − 1 / LN n
∑
s
j
j =1
ln s
j
（ 1）
2.2 Data collection and sortion
Due to the availability of statistics, the ratio of the five main traditional service industries of logistics
industry, wholesale retailing, accommodation and restaurant, finance and real state among the whole
service industry and their varying trend are reviewed. Their own industry GDP is Xi i=1 2 3 Entropy
index which is used to describe the structure of service industry in China is constructed. The data
originates from statistic yearbook in the past years and factors of inflation have been eliminated.
1
Xi
Xi
D str = −
(∑
ln
)
2
ln 5
∑ Xi ∑ Xi
Therefore, the scope of the value of entropy index Dstr is from 0 to 1. The smaller the value of the
entropy index, the more convergent its industry structure will be and vice versa, the larger the value of
the entropy index, the more balanced its industry structure will be.
（ ， ， ）。
（ ）
xe
dn
i
yp
or
tn
E
0.98
0.96
0.94
0.92
0.9
0.88
0.86
0.84
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20
year
Figure1 Entropy index of service industry structure from 1978 to 2009
According to formula (2), entropy index in the past few years from 1978 to 2009 is shown in Table 1.It
is shown through figure 1 that the value of entropy index of service industry in China is increasing from
0.89 in 1978 to 0.95 in 2009 during the past 20 years. Industry structure is gradually optimized from
replying on mere transportation and wholesale retailing service industry to finance, restaurant, real
estate, etc. Besides, obvious fluctuation can be seen from entropy index from 1988 to 1991, during
which household responsibility contract system has developed from the beginning of market economy
reform to the adjustment and trial period in 1992 when market economy reform is advanced in an
overall way. There exists certain relationship between internal structural fluctuations in service industry
and many policy adjustments during the special reform period.
Year
1978
1979
1980
1981
1982
Table 1 Entropy index of service industry structure from 1978 to 2009
Entropy index
Year
Entropy index
Year
0.88555
1989
0.918407
2000
0.902638
1990
0.941951
2001
0.911862
1991
0.936966
2002
0.908898
1992
0.941583
2003
0.938949
1993
0.945811
2004
184
Entropy index
0.945561
0.944624
0.946189
0.947971
0.949194
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1983
1984
1985
1986
1987
1988
3
0.944079
0.937508
0.883601
0.912854
0.910124
0.895513
1994
1995
1996
1997
1998
1999
0.95028
0.947055
0.942653
0.943946
0.947185
0.945689
2005
2006
2007
2008
2009
0.950833
0.954038
0.955016
0.949981
0.95046
Empirical Result and Research Conclusion
3.1 Model construction
We attempt to study the influence of the growth of service industry on its alternation of industry
structure. We use entropy index which is constructed to measure industry structure as dependent
variables and total GDP gross of service industry in the past years in China as independent variables.
Partial features of dependent variables’ entropy index have been described in the previous paragraphs.
The entropy index is convergent when the scope of value is from 0 to 1. Therefore, we use Logit model
for regress estimate
y i = F ( z i ) = F (α + β x i ) =
1
1
=
− zi
− ( α + β xi )
1− e
1− e
transformed into:
D str i =
1
1− e
− ( α + β SERV i + µ i )
SERV i stands for the ith GDP in service industry while
Dstr i stands for the ith entropy index in
service industry.
Model 5 will be obtained when model 4 is linearlized
：
D str i
H i = ln(
) = α + β SERV i + µ i
1 − D str i
3.2 Estimate result
Through the use of software STATA10.0 for estimate, the result is shown in table 2:
Table 2 Estimate result of model 5
Dependent variable Dstrj
Estimate coefficient Std.dev
t value
2.93E-05
7.84E-08
3.74
0.9246
0.003983
232.10
：
variable
SERV
-CONS
Obs = 32
R-Square = 0.67
4
R-Square Adjusted = 0.68
probability
0.001
0.000
Prob > F = 0.0008
Conclusion and Suggestion
Through calculation of the structure of service industry and economic growth of industry, the following
conclusion can be drawn:
1. The overall economic growth of service industry is the important impetus of the diversity of its
industry structure. From the estimate result,the GDP of service industry is positive related with entropy
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index of service industry structure . The probable reason lies in the fact that when social service industry
is developed to certain level and basic industry such as transportation and commercial industry can
satisfy the basic living requirement, the society will need a diverse demand towards service. The diverse
demand is manifested in two aspects: first, diverse production demand. With the gradual development of
market economy, production in various industries and fields needs the corresponding external service
system. The rapid development of production service industries such as logistics, finance and trade, etc
which are directly associated with production promote the diversity of industry structure in service
industry; Second, the diversity of living requirement. People’s living requirement is increasingly diverse.
The requirement of finance, catering and real estate promotes the sustainable development of related
service industry in reform and opening up policy throughout China.
The development of service industry is aimed at satisfying the diverse requirement of social
development. Therefore, various measures should be taken in order to further promote the development
of service industry and to further satisfy and enrich the social requirement. For example, trade monopoly
and trade approval restriction in such industries as logistics and transportation should be unlocked in
order to promote the structural change of service industry.
2. There are other inducements that result in structural diversity. According to calculation result, the use
of total GDP for explanation of structural change can only account for 60% of the diversity of industry
structure and there are still over 30% of industry structure that can not be explained. The reasons are as
follows: from the microcosmic perspective, residents’ consumption habits are reflected in macroscopical
data. Besides, various regions rely on their own resource advantages and develop their superior industry.
Meanwhile, the diversity of resource advantages in various regions results in the diversity of industry
development. However, generally speaking, the reason of the increase of trend diversity degree should
be further analyzed according to microcosmic data and detailed variables.
Related management departments are supposed to get to know the tendency of social service
requirement. Meanwhile, planning levels of industry development should be strengthened so that the
development of service industry can be coordinated and unnecessary repetitious construction and
resource waste can be avoided.
Author in brief:
Song Yingjie, male, Economic Department teacher in Shandong Institute of Business and Technology;
Research focus is: macroeconomic theory; Lv Cuicui, female, Shandong Province, lecturer in Foreign
Language Teaching Department, Shandong Institute of Business and Technology with research interest
including International Trade English and sociolinguistics.
Acknowledgment:
This work was supported in part by a grant from general projects of national natural science foundation
“Research on Quality Safe Control of Agricultural Products Based on Technological Diffusion” ID
70873075
（ ：
）
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： ，
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