Research On China's Inter-provincial Economic Disparities Based On TFP Perspective

Since implementation of reform and opening-up policy in 1978,China's economy has achieved constantly rapid growth, however the problem of regional disparity has become increasingly prominent,and showed a tendency to expand since 1990. The expansion of regional disparities not only reduces economic efficiency but also affects the social stability.What causes the regional disparity? how to narrow it? which has become a major issue faced by the governments and academic circles. The regional disparity is a pervasive economic phenomenon and a hot issue in academic circlesat home and abroad,the impact of factor inputs and TFP which are two important factors to promote economic growth on the regional disparity is given serious attention naturally. Most researchers agreed that the difference in factor inputs was the main reason leading to regional disparity in the early 1990s, due to the impact of the law of diminishing marginal returns of capital in neo-classical economic growth theory since the mid-and-late 1990s , foreign scholars have taken TFP as the focus of attention ,and found that TFP is the main reason leading to regional disparity after extensive empirical study . What will be the difference of provincial TFP in China? what impact will it bring on the inter-provincial economic disparity?what is its mechanism of action like? The existing literature has not in-depth study on this issue. In order to make up for lack of this research, this paper conducts a calculation of inter-provincial economic disparities and TFP in China on the base of review of relevant theoretical and empirical research, and then analyzes the influences and their mechanisms of the level of TFP, composition of TFP and convergence of TFP on China's inter-provincial economic disparities. Finally , the paper analyzes influencing factors on TFP.As a research bedding, firstly, this paper presents and reviews the connotation, development, calculation methods and measurement studies of TFP, the same time, the paper tests inter-provincial economic disparities by using Theil index, growth regression and Markov chain method, the results show that the inter-provincial economic disparity in China has a tendency to expand as a whole from 1985 to 2007.Then the paper estimates TFP of every province from 1985 to 2007 by using revised Solow model, according to the results the paper analyzes impacts of TFP and factor input on regional economic disparities in China by using dynamic distribution method. Meanwhile, the paper also analyzes the short and long term relations of TFP,factor inputs and outputs of per labor by using co-integration test method,impulse response and variance decomposition analysis based on VECM, the study finds thatTFP contributes to the main inter-provincial economic disparities.Then this paper uses DEA and SFA to decompose the provincial TFP, and analyzes the inter-provincial differences and trends of composition of TFP. While taking advantage of the results the paper conducts a further four-fold decomposition of output of per labor , the results show that inter-provincial differences of the growth of output maken by technical efficiency is the largest in all factors. According to SFA calculation results which are more in line with China's actual conditions, the paper analyzes the dynamic effects of factor inputs, TFP and its compositions on inter-provincial economic disparities by adopting kernel density estimation method and Kalman filtering method of state-space model. The results show that technical efficiency is the the main reason leading to inter-provincial economic disparity ,which followed by the impacts of technical progress and capital deepening, while scale economy has a minimal impact on regional disparity.This paper also tests spatial autocorrelation of output per labor and TFP by using Moran's I based on the economic weight matrix , and analyzes the convergences of output per labor, TFP and various factor inputs and their relationship by adopting space error and spatial lag model ofβconvergence based on spatial panel data. The study finds that TFP making the greatest contribution for the convergence of output per labor is the main reason leading to inter-provincial economic disparity and convergence of technical efficiency determines the convergence of TFP.Finally, the paper analyzes influencing factors on the level of TFP,the growth of TFP and its composition by using fixed effects model and dynamic GMM estimation method based on panel data and conducts a comparative analysis of calculation results of two models. The results show that R& D, human capital, exports, FDI and the level of industrialization can improve the total factor productivity ,but the investment rate has a hindering effect in improving TFP.The impact of import trade on the level of total factor productivity is associated with R & D ,but it has a reverse effect on the growth of TFP and its composition.Capital deepening can improve the level of total factor productivity, but it can reduce the growth of total factor productivity.Based on above conclusions,some policies and measures can be apopted: adhering to scientific development and the principle of taking a new road to industrialization, backward provinces'TFP can be significantly improved by reforming the existing economic system, encouraging technological innovation, vigorously developing human resources, actively developing the export-oriented economy and accelerating the industrialization and urbanization, which can reduce the inter-provincial economic disparity and achieve balanced regional development ultimately.