Capital Accumulation,Biased Technical Change And Income Convergence Across Countries

This paper is based on the analysis of the three typical facts of economic growth. One of the three typical facts is the share of labor compensation in GDP is increasing in last decades. Another typical fact is manufacturing industry across countries shows unconditional convergence. The last typical fact is that the country which successful catching up with high income countries has increased higher capital accumulation trend. The three facts mean that biased technical change (capital and labor) will be important to the growth of developing countries. Most studies focus on the importance of technical progress but not biased technical change. This article focuses on the effects on income convergence with the choice of technology direction in developing countries. The main contents and conclusions of the research are as follows:1. We pointed out that income showed a trend of convergence in 2000 and beyond, but still presented income divergence trend on a longer scale. Then we compared the relationship between the technology convergence and income convergence then pointed out that the demand of different development phases state of elements are not the same. We pointed out that there is no absolute convergence of income between countries, there is only conditional convergence. The influence of initial conditions on long-term income convergence is uncertain, and the dynamic change and ascension elements structure is very important. But what kind of elements should be firstly developed is still not solved.2. Follow with Klump, McAdam and Willman (2007); we used the normalized supply-side system to calculate the technical characteristics of the major countries. We found that the substitution elasticity of capital and labor in the long term is less than 1, and the growth rate of capital efficiency is less than the growth rate of labor efficiency. Therefore, most countries technical direction is capital biased. This explained that the share of labor income in many countries fallen. Then we analyzed the substitution elasticity of capital and labor and found that the higher substitution elasticity of labor and capital always followed with the higher abundant capital level. Finally, we argued the reasons why these countries choose such technical direction.3. After measured the biased technical index, we argue the relationship with the index the factors and growth also income share. We found that the countries which has higher biased technical index would achieve faster economic growth. The relationship is stable in the cross section of data analysis and the panel data. The relationship of the biased technical index and capital income share is similar. This mechanism will influence on the income convergence because of the difference of factor endowment across countries.4. The biased technical change to capital will benefit developing countries, but the persistence of such selection remains a problem. We argued the problem from three aspects. We found that the capital efficiency decline will be inhibited as much as 75% when introduced the growth of human capital in the United States. Then we measured the technical changes which need not the neutral assumption using the DEA method. The conclusion confirmed the existence of technical progress with capital. This is mainly due to the introduction of the new capital which included new technology in developing countries.5. We first analyzed the nature of technology in the aspect of cindering the relationship of capital accumulation and technical progress. Then we put forward the preferred path of income convergence in developing countries. At last we verify the correctness of the preferred path with comparing the marginal capital product ratio and the experiences of typical countries. No matter from the perspective of the marginal output of capital or the case of typical countries, China is on the preferred path.The selection of technical change biased to capital can achieve faster economic growth in developing countries. The main reason is that the positive externalities of capital are relatively easy to reflect in all basic elements (technology, labor and capital) in the open and stable economies.