Download Scientific and Technological Progress Conduct Tremendous

Scientific and Technological Progress Conduct Tremendous
Contribution for Economy Growth in Henan Province
YANG Yuzhen, SHU Liangyou
School of Economics & Management, Henan Polytechnic University,
P.R.China, 454010
Abstract
This article based on the model of Cobb-Douglas production function and the analytic
indices of economy development. Multiple parameters regression estimates are used to study related
statistic date from 1996 to 2005 to estimate the asset-production and the labor-production elasticity.
Then, a specific analysis is made by means of Solow-remaining method on technology progress
contributing to economic development. At last it analyzes the model of Henan’s economic development
and proposes the opinions to increase the development of Henan’s economy.
Key words
Cobb-Douglas production function; contribution ratio of scientific and technological
advancement; economic growth; Solow—remaining method; Henan province
1 Introduction
In the high growth of global economy, the contribution ratio of technology has risen from about 5%
at the beginning of last century to 60%-70%.the economic growth per year from 1979—1984 in the
united states is 3.61%,in which obtaining from scientific and technological progress is 2.6%,accounting
for 71%. Japan's average annual GNP growth rate is 9.5% from 1952 to 1968, in which the contributing
rate of science and technology is 65%. [1]The contribution of Science and technology to economic
growth has aroused great attention, and has become one of the most important indicators to measure a
nation or regional economic development capacity. At present, Henan province confronts with the
opportunities of the fast development of global science and technology, and also coincides with the
change of economic growth mode from extensive to intensive type. So determining the contribution
ratio of science and technology to the economic growth of this province, will benefits us to find the
problems existing in the economic growth and find the technical means and methods to optimize the
industrial structure and help the sustained and healthy economic development. It will has important
significance to guide and promote the development of economy and management science.
2 Determine Contribution of Science and Technology to Economy Growth
2.1 Economical growths factors and model
Capital, labor and technological progress, are the important factors in economy growth. Inevitably,
the economy growth must have the capital increase. Especially in the beginning of the economy growth,
capital increase contributes a lot. Many economists take the capital accumulation accounted for 10-15%
of the national income, as an economic take-off prerequisite, and consider the increase in capital as the
primary task to achieve economic growth. The number increasing and the quality improving of labor
also play an important role to economy growth. However with economic development, technological
advances in economic growth have made increasing contributions, which generally exceed 50%.
About the calculations of science and technology progress effects to economy growth, the
commonly used model includes: Cobb-Douglas production function model and CES production function
model. The Cobb-Douglas production function model is one of the invariable substitution elasticity
production functions which is applied widely. Then, based on the Cobb-Douglas production function,
Solow proposed the model to measure the science and technology contribution to the economic growth.
CES production function model is proposed by Arrow in 1961.It considers the constant elasticity of
substitution function of production between labor and capital, which can also calculates the level of
technological progress. Currently the world's most sophisticated analysis of economic growth, "Denison
and Jorgenson's-law," regarded capital (K) and labor (L), as the economic growth of investments. So I
used the famous Cobb-Douglas production function, and give the total economic output function:
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Y = A0 e rt Lα K β
(1)
In the formula, Y is output, A0 is the base period technical level, t is the time variable, r is the coefficient
for the progress of science and technology , L is work investment quantity, K is fund investment
quantity, α is the asset-production elasticity and β is the labor-production elasticity.
Take on both sides in the natural logarithm to formula (1):
ln Y = ln A0 + rt + α ln L + β ln K
(2)
Due to the use of temporal information estimated production function, labor and capital are highly
correlated. It will cause multi-co linearity easily, In order to eliminate the multi-co linearity, we assume
that the scale of remuneration unchanged, that is, and (2) can transform:
ln ( Y / L ) = ln A0 + rt + β ln ( K / L )
(3)
Take time-series data of output Y, capital K, labor force L as the basis, we used multiple least-squares
regression to estimate ln A0 , r , β .
2.2 determine contribution of science and technology to economic growth
We use the Solow –remaining method to determine contribution rate of scientific and technological
progress.
Take on both sides differential of t to formula (2):
dY
dL
dK
dt = rdt + α
dt + β
dt
(4)
Y
L
K
Discrete formula (4),command dt = 1 , then has:
∆A ∆Y
∆L
∆K
=
−α
−β
(5)
A
Y
L
K
∆Y ∆L ∆K
,
,
as output growth rate, the labor force growth rate and capital
In the formula (5),
Y L K
∆A
as generalized technology advanced rate. If we use E A , EK , EL as contribution
growth rate.
A
rates of technology progress, capital and labor force to economy growth, we has:
∆A ∆Y
∆K ∆Y
∆L ∆Y
/
× 100%, EK =
/
× 100%, EL =
/
× 100%
A Y
K Y
L Y
Because E A + EL + E K = 1
(7)
EA =
So E A = 1 − EL − EK
(6)
(8)
E A Is generalized the contribution rate of scientific and technological progress. It describes the
proportion of science and technology progress in the speed of economy growth. It is a composite
indicator which reflects the effects of science and technology progress to economic growth.
3 Contribution Rate of Science and Technology to Economic Growth in Henan
3.1 Based data
Y directly used the year of 1996 as the base period of GDP fixed price index; K takes the total
investment of entire social fixed asset; L uses "the entire society job holders" in the yearbook. This
indicator includes employees of state-owned units, urban self-employed and private businesses and rural
laborers. Thus it may quite accurately reflect the labor force investment as essential fact to the
contribution of economy growth. With the number of years of employment instead of quantity of work,
it is assumed that individual workers in the labor are not qualitatively different. Labor differences of
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Individual workers all attribute to the progress of science and technology investments to reflect, because
the improving of quality and skills of workers is often the results of continuous development of science
and technology education. Table 1 is the correlated data,
years
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
Y/
(a hundred million yuan
3666.18
4079.26
4356.60
4576.10
5137.66
5640.11
6168.73
7048.59
8815.09
10587.42
Table 1 Based data and Calculations
Fixed assets investment Employed workers
K/
(ten thousand
(a hundred million yuan)
Person)
1039.41
4829.2
1209.50
5017.0
1289.70
4999.6
1206.83
5205.0
1377.74
5571.7
1544.06
5516.6
1725.93
5522.0
2262.97
5535.7
3099.40
5587.4
4378.69
5562.0
）
lnY/L
lnK/L
8.933445
9.003424
9.072674
9.081504
9.129238
9.232482
9.321093
9.451950
9.666291
9.836230
7.674313
7.787715
7.855392
7.748718
7.813085
7.936994
8.047366
8.315800
8.621035
8.953313
Data sources: China Statistical Yearbook
3.2 Henan's economic growth model
3.2.1 Determine parameters of Cobb-Douglas production function
Using the data in Table 1, we use the OLS method with Eview software to estimate the production
function and obtain the result. The values of ln A0 , r , β are 5.410081 0.037092 0.453072..so the
value of α is 0.546928..it is:
，
ln ( Y / L ) = 5.0410081 + 0.037092t + 0.453074 ln( K / L)
，
(9)
Then, we can get the value of A0 ,so
Y = 223.649702e 0.037092t L0.546928 K 0.453072
(10)
3.2.2 Statistical results tests
2
1) R test
2
R = 0.998433 not only explains variable r, ln ( K / L ) and ln ( Y / L ) are highly linear correlation,
simultaneously it indicates the material in table 1 fits superior to be better.
2) t test
| t1 |= 11.24968 > t0.025 (10 − 3) = 2.365 .it explains time factor t influence ln ( Y / L ) remarkably.
As time goes by, the contribution of technology progress in the economic growth of Henan will play
significant role.
From | t2 |= 19.21839 > t0.025 (10 − 3) = 2.365 it shows capital factor ln K and labor factor ln L
impact ln Y significantly. It also shows the development of Henan in recent 10 years relies on
increasing material factors (labor and capital) inputs, which the mode of economy growth still paused in
the transformation period from extensive to intensive economic growth model.
3) F test
Given α = 0.05 , in the F distribution lists, we looks up the first degree of freedom is 2, the
second degree of freedom is 7. F0.05 ( 2, 7 ) = 4.74 , obviously F = 2230.006 > 4.74 , it shows
regression equation (9) is tenable.
3.3 Analysis on contribution of science and technology to economy growth of Henan
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1) Assets output indicators α = 0.546928 shows capital input of 1% growth could lead to Henan
GDP0.546928% growth; labor output indicators β = 0.453072 shows labor inputs 1% growth can
lead to Henan GDP 0.453072% growth.
2)The
relative
density
of
the
capital
indicators
µ = β / α = 0.453072 / 0.546928 = 0.828394 < 1 shows in the process of economic development
in Henan, capital is relatively easy to replace labor. It also reflects the poor quality of workers' skills, its
strong alternative and the reality of scarce capital.
3) the contributions rates of labor, capital, technology progress to economic growth in Henan can be
seen from Table 2.From the data in Table 2 ,we can find that on the one hand, the contribution of capital
investment to economic growth is biggest, except individual years, its contribution to the economic
growth rates consistently higher than 50%. Particularly in 2003 and 2005 its contribution to the
economy is more than 90%. From the contribution rate of scientific and technological progress, the rates
of science and technology are very low. Some years it is less than 10%.between 1997-2005, the
contribution rate of scientific and technological progress is only 36.8% ,but capital and labor
contribution rate is 63.2%.it shows economic growth mainly depends on a lot of factors of production
inputs in the province, still in the tradition of high input, high consumption, low output and low
efficiency of the extensive growth mode, leading to a slower pace of economic growth, irrational
economic structure, seriously hampering the rapid economic growth of Henan Province. On the other
hand the data indicated this province economy growth cannot promote the work investment growth. It
also shows the number of workers who can meet the requirements of modern scientific and
technological progress is very limited. Most of the work skills of workers is very low.
years
total output
growth
Table 2 Contribution rates of production factors
total
fixed annual
growth rate
rate of labor
assets growth
rate
of of
capital contribution
employment
contribution
1997
1998
1999
2000
2001
2002
2003
2004
2005
0.114193
0.067988
0.050383
0.122716
0.097797
0.093725
0.142632
0.250617
0.201056
0.163641
0.066308
—0.064255
0.141619
0.120719
0.117787
0.311160
0.369616
0.412754
0.038888
—0.003468
0.041083
0.070451
—0.009890
0.000979
0.002481
0.009339
0.013351
0.649264
0.441880
—0.577815
0.522863
0.559264
0.569387
0.988400
0.668200
0.930124
0.186251
—0.027900
0.445973
0.313993
—0.055305
0.005712
0.009513
0.020381
0.036320
rate of
Science
and
technology
contribution
0.164485
0.58602
1.131842
0.163144
0.495681
0.424901
0.002087
0.311419
0.033556
4 Conclusion
Strategies of Improving science and technology contribution to Henan economic
growth
Develop agriculture through science and technology. Relying on science and technology, we
should readjust the agricultural structure, vigorously promote a new revolution in agricultural science
and technology and promote agricultural industrialization process, strengthen the use of important
technology in agriculture and rural economic development. Through the key technologies of research
and development, we should construct agricultural technology park, at last promote the transformation
of agriculture from traditional to modern agriculture.
Rely on scientific and technological progress, adjust industrial structure. We should establish
enterprises as the mainstay of technological innovation system, enhance science and technology
progress in the pillars industries, and promote the optimization of the industrial structure and the
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upgrading of industrial technology. It is necessary to emphasize the province's scientific and
technological development, but should also pay attention to make use of their superiority from the
developed regions in attracting foreign advanced technology. Then we can maximize the production of
industrial technology, vigorously developing high-tech industries.
Vigorously develop education, train and attract talents. While promoting the progress of science
and technology, we should increase the job chances, and improve the quality of laborers. We should
increase investment to train various needs of talents for the development of Henan economy, at the same
time, implement preferential policies to attract and retain high-level talents. Do our best to construct a
policy and social environment, ensure the talents be fully utilized.
References
[1] Zheng Jie,Feng Ming. Analysis on contribution of science and technology progress to economic
growth of Dandong City [J]. Liaodong Journal, 2006 (3): 116-118.
[2] Li Jianping, Zhang Hua-rong, and so on. Scientific and technological progress and economic growth
[M]. Beijing : China Economic Publishing House, 2005.
[3] Pang Hao, Lee Nancheng, and so on. Econometrics [M]. Chengdu : Southwest University of Finance
and Economics university publishing house, 2002.
[4]Zhang wang. Econometric analysis on technology advancement contributing to Fujian economic
development. Fujian College of Engineering Journal, 2006 (4) : 68-72.
The author can be contacted from e-mail : [email protected]
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