The Contribution Of Total Factor Productivity And Human Capital To Chinese Economic Growth

The opening-up and economic reform which have been happening since the end of 1970s put China under the spotlight of the world. China has become a country with the fastest economic growth in terms of its 10% average increase in GDP since 1978. However, various problems have emerged in the process of opening-up. The industrial development has cost enormous amount of resources, and caused many environment issues, while the social development can not handle the rapid economic growth. Furthermore, it is difficult to keep developing through capital investment. In order to achieve sustainable development during the next phase of our strategy, the key is to convert our economic growth mode and implement other elements, especially the 'people' which is taking an important role. Therefore, quantitative analysis of proportion in Chinese economic growth which total factor productivity and human capital accumulation will take is essential. Based on the study, the analysis of the feasibility of Chinese economic growth mode transformation is crucial for guiding Chinese economic construction.To study economic growth, economists established and developed a series of theories and models. From the Harrod - Domar model to the Solow model and then to present endogenous growth theory and human capital theory, economists continued to study the relationship between various elements and economic growth, trying to find a source of economic growth. However in a variety of elements, total factor productivity and human capital theories have become hot topics, because they are not restricted by scale return decreasing theory, which means they've got the sustainable growth feature. Based on the theory of economic growth, through the Solow model and the improved Mankiw - Romer - Ware growth model, this paper estimated the economic growth contribution of Chinese total factor productivity and changes in the human capital stock since 1978. To tie into the use of the above models, the author collected the GDP, employment, fixed asset investment, resident education, actual payroll and other data since 1978 and estimated Chinese capital stock and human capital stock using popular measurement methods. During the process of regression analysis, in order to achieve a better fitting result, this paper used ARMA model, first-order difference method, and other quantitative analysis to study data, which effectively improved the credibility of the result. The result shows that since the reform and opening-up, Chinese economic growth is mainly driven by capital investment, while the contribution of total factor productivity is relatively low, even negative in some years. In the mean time, the economic growth contribution of Chinese human capital stock per head was only 21.3 percent of the capital stock per head. Corresponding to the results, the author believes that in our country there is still room in strengthening the human capital inputs, especially labor education and training. The improvement of labor quality will drive the technological innovation and improve the total factor productivity which is the rate of technological progress. This will convert Chinese economic growth mode at last.At last, the essay structure is as follows. Firstly, it introduced the purpose and innovation of the article, as well as analysis of the result. Secondly, it summarized relevant theories, analyzed and sorted the development process of neo-classical theory about economic growth. Thirdly, based on data analysis it discussed the impact on economic growth of domestic total factor productivity and residual human capital. Finally, it concluded results as well as giving suggestions on policies.