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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: 981 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 982 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 983 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 984 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] 985