| Throughout the history of world development,services expand,industrial structure changes with the development of the economy.Since the reform and openingup,China has grown from an agricultural country to a world manufacturing powerhouse and has gradually become a country with services as its largest industry.However,scholars have different opinions on whether the expansion of services can promote economic growth,among which the cost disease of services should be paid more attention.The concept of services cost disease is derived from Baumol(1967),which mainly refers to: with the increase of services labor and value-added share,since services productivity growth rate is lower than manufacturing,the relative cost of services’ production will rise,its expansion will pull down the total productivity growth rate and have a negative impact on economic growth.Based on the development of China’s services,this paper finds that there exists services cost disease in China and discusses the development,change,and influence factors of China’s services cost disease from the perspective of structural transformation.This paper mainly including the following contents.First,we sort out relevant theories and literature on the cost disease of services.The second chapter of this paper mainly introduces the theoretical framework of services cost disease,and discusses the birth,growing,and refute of it.Furthermore,we sort out the relevant literature from the development of services,structural transformation,and services cost disease.It is found that most of the existing research on services cost disease is based on the experience of developed countries,while there is little discussion on developing countries.Therefore,this paper mainly studies the cost disease of services in China and analyzes new characteristics of the cost disease of services under different development backgrounds.The third chapter will analyze the characteristics of China’s services from the perspectives of different periods,different regions,different provinces,as well as international comparisons by combining related statistical data.The results show that the progress of China’s structural transformation is fast,the development of services varies greatly in different periods,while the path of services develops in different regions is similar.Compared with the industrial structure of different countries,China is a structurally developing country,and there is still much room for improvement in services.Second,calculate the size of services cost disease.We conclude that there exist services cost disease in China based on the discussion of the distribution of demand elasticity of income and prices,differences in productivity,and its growth rate and prices between sectors.However,the impact of services development on economic growth is too complex to calculate the cost disease of services directly.The fourth chapter analyzes the impact of services’ value-added and labor share on the total labor productivity growth rate by using two methods to estimate the size of services cost disease.The first method,reference Duernecker and Herrendorf(2017)calculates the Structural effect of total labor productivity growth rate.It was found that the Structural effect was negative in most years from 1978 to 2019 and showed a decreasing trend.The structural effect was-2.53% in 2013,which means that the total labor productivity growth rate was reduced by 2.53% due to structural change.The second method refers to the research of Nordhaus(2002)which calculates the Baumol effect of total labor productivity growth rate.It is found that the size and distribution of Baumol effect and Structural effect are similar,which indicates that these two methods for calculating the services cost disease are relatively reliable.Third,demand elasticity of income and price are key factors which affect structural change and the size of services cost disease.In chapter five we focus on the analysis of the utility function by introducing the PIGL utility function(Boppart,2014)into a two-sector growth model to discuss the drivers of structural change and the impact of income and price effects on the development of services in China.It is found that the income elasticity of services is greater than that of the goods sector.Goods are necessity while services are luxury.The elasticity of substitution between services and goods increases slowly,but always less than 1,indicating that they are complementary products.Further,it is found that the influence of price effect is more significant on services cost disease than income effect.We also analyze the Stone Geary and the nonhomothetic CES utility function,discuss the differences between these three preferences,and summarize their characteristics and applicable scope.Fourth,as capital is playing an increasingly important role in production,it is especially important to optimize the investment structure as the growth rate of investment in China is declining.The existing literature also discusses capital and investment,but most articles assume that investment is produced by manufacturing or an independent investment sector,which simplifies the services’ ability to produce an investment.Based on this,the sixth chapter assumes that both sectors can produce investment,and measures structural transformation with the changes of investment structure,consumption structure,value-added structure,and employment structure.Additionally,we quantitatively analyze the impact of investment structure on services cost disease.It is found that as the substitution elasticity of goods and services increases,the investment share of services will decline thus reduce the absolute value of services cost disease.In addition,increasing the investment rate and the share of investment of goods sector can promote the growth rate of total labor productivity and cure the cost disease of services.Fifth,considering the heterogeneity of different industries within services,chapter seven will divide services into two categories: producer services and consumer services.Using the data of 19 industries from 2004 to 2017 of China,we analyze the changes in the internal structure of services.By establishing a three-sector model,the demand elasticity of income and substitution are analyzed by assuming a nested non-homothetic CES utility function.We find that goods and services are complementary,with goods as necessities and services as luxuries.The products of consumer services are necessities,while those of producer services are luxuries.And we predict the trend of services cost disease,finds that services will keep growing,and Baumol effect will have a greater negative impact on the growth rate of total labor productivity,from-0.56% in 2017 to-1.62% in 2034,the cost disease of services will be even worse in the future.Services expansion is the main characteristic of China’s structural change at this stage and is the general trend of China’s structural change in the future.If the expansion of services will impede the overall economic growth,the direction,and manner of its development worth discussing.Finding out the problems in China’s structural change and clarifying the strategies for promoting structural upgrading are favorable guarantees for promoting economic growth.This paper analyzes the cost disease of service from the perspective of structural change,discusses the relationship between the development of services and economic growth,and tries to provide corresponding policy suggestions for reducing the cost disease of services. |
