The Study On The Impact Of Chinese Manufacturing Industry Technology Progress On Its Market Structure

The Study on the Impact of Chinese Manufacturing Industry Technology Progress on Its Market StructureAssociated with the development of the theory of industrial organization, the research on the relationship between technology progress and market structure has become deeper and deeper. Raised from the Schumpeter s theory of technological innovation, experiencing the Harvard School, Chicago School and the new theory of industrial organization, the focus of study has changed from structure to conduct. Past research was a continuation of the Harvard School of Classical SCP paradigm. That is what kind of market structure is conducive to technological progress. Scherer suggested that we should analyze the basic decision condition of market structure from the perspective of supply and demand, which made the Classical SCP paradigm more complete. This gave us a new ideal on the study about the relationship between technology progress and market structure. That is whether technology progress will affect market structure, which constituted a new study field of the theory of industrial organization along with the dynamics research thinking of technology strategy proposed by new theory of industrial organization.According to the dynamics research thinking of technology strategy proposed by new theory of industrial organization and Scherer's suggestion, this paper reveals the impact of technology progress on its market structure. We select annual data from 1996 to 2007 of 28 industries in Chinese manufacturing and analyze the impact of technology progress on its market structure by measuring the technology progress of 28 industries and their market structure change in 12 years.We take use of technology progress as an integrated description of technological innovation and technology diffusion to portray the outcome of the industry technical characteristics. In this paper, we select parameters stochastic frontier production function methods to measure technology progress. This model supposes that the gap between the actual output and the potential largest output caused by both low technical efficiency and external random shocks. So, taking random effect and technical inefficiency in to account is the essence of stochastic frontier production function theory. According to Kumbhakar's classic analysis framework, under the assumption that the allocation of production fators is effective, the growth rate of total factor productivity can be decomposed into frontier technological progress rate, the change rate of technical efficiency relative to frontier and economies of scaleThere is only quantitative information in the equation, TFP is the growth rate of total factor productivity. On the right, the first is frontier technological progress rate FTP. The second is economies of scale SE.The third is the change rate of technical efficiency relative to frontier TE.According to Battese and Coelli's distribution assumption and time-varying technical efficiency form, ist producer in period t constitute a panel data model. By constructing a flexible time-varying stochastic frontier translog production function formThe growth rate of total factor productivity follows decomposition as below By estimating parameters of the model, one could measure frontier technological progress rate FTP,economies of scale SE,the change rate of technical efficiency relative to frontier TE and the growth rate of total factor productivity TFP. The results show that from 1996 to 2007, the Chinese manufacturing industry's frontier technological progress rate FTP increases year by year. Technical efficiency TE continuously improves, but the change rate of technical efficiency relative to frontier TE has been declining. Changes in economies of scale effect is always negative, the growth rate of total factor productivity increases over the years. Follow Solow's thinking, we look the growth rate of total factor productivity as the technology progress rate.In the study on the classical SCP paradigm in the theory of industrial organization, market structure is the core concept and research theme. The market structure refers to the characteristic of market organization such as the level of competition on market and how the market price formed that can have a strategic impact. In other words, all market agents' status,roles,ratio and the characteristics of the goods exchanged in a specific market form a specific industry market structure. Fundamentally speaking, the essence of the market structure problem of an industry is the extent of competition or monopoly. Based on this, researchers usually use the market concentration as the measurement of market structure (market monopoly power). There are two main methods in measuring the market structure of an industry: one is absolute concentration, and the other is relative concentration. Absolute concentration methods include concentration of an industry(CR_n),Herfindahl Index(HHI),Heiner-Kai Index(HKI) and Entropy Index(EI). Relative concentration methods include Lorenz curve and Gini coefficient. However, these classical methods require high quality data, and one must know the exact market share of enterprises in an industry to measure the market concentration. But in this paper, the above mentioned methods are not suitable. We take the method proposed by Kalecki in 1938 and price-cost margin method proposed by Cheung and Pascual in 2004 to indirectly measure the degree of market concentration of 28 industries respectively in Chinese manufacturing industry from 1996 to 2007. By comparing the two methods, we find it is more reality to use PCM as an indirect measurement of market concentration. So we take the PCM method to measure the change of market structure in Chinese manufacturing industry from 1996 to 2007. The results show that most of the industries become more and more concentrated in this period, and individual industries tend to be more competitive.In this paper, when measuring the technology progress and market structure, we use the time series and cross section combination data. So when establishing the empirical econometric model, in order to analyze the impact of technology progress on its market structure, we construct two variable intercept and variable coefficient fixed effect Panel Data models.Two models in this study inspect the impact of the three components which constitute the growth rate of total factor productivity under the framework of stochastic frontier model on market structure, and also inspect the impact of the growth rate of total factor productivity as an integrated technology progress on market structure. Using EViews 6 to estimate the parameters in above models, the results show that: for different industries, frontier technological progress rate FTP,economies of scale SE,the change rate of technical efficiency relative to frontier TE had different impacts on market structure. For most industries, the increasing of the growth rate of total factor productivity leads market structure to be more concentrated significantly. But for the oil coking and nuclear fuel processing industry,chemical fiber manufacturing,communication equipment,computers and other electronic equipment manufacturing industry, the increasing of the growth rate of total factor productivity has a negative impact on market structure significantly. And for Cultural and educational furniture manufacturing and the sporting goods manufacturing, total factor productivity change has no significant impact on market structure.So, according to the dynamics research thinking of technology strategy proposed by new theory of industrial organization and Scherer's suggestion that we should analyze the basic decision condition of market structure from the perspective of supply and demand, through empirical analysis, we find that for 28 industries in Chinese manufacturing industry from 1996 to 2007, industry technology progress has different impacts on different industries.