The Source Of Chinese Manufacturing Technology Progress

Technology progress is always a hot topic in the economics field from the middle of last century to nowadays. Begin with quantitative analysis to technology progress firstly by Solow(1957), methods for measuring technology progress become more and more innovative. Among them, stochastic frontier production function method is a advanced one. Technology progress origins from two ways that domestic investment and foreign direct investment (FDI). In our country manufacturing which is pillar industry in industrial sector takes a large part in FDI. In view of this, we use panel data of 28 sectors of Chinese manufacturing from 2001 to 2007, to analyze the impact domestic and foreign investment on technology progress.Firstly, from a theoretical point of view, we discuss respectively the mechanism how domestic investment and foreign direct investment affect. As the most important part of foreign investment, foreign direct investment is also a main way to promote the transfer and diffusion of advanced international technology. The study about technology diffusion or diffusion of innovation can be traced back as early as the innovative theory which proposed by Schumpeter (1912). With the further research about technology diffusion, scholars generally believe that technology diffusion which FDI brings transfers to the host enterprise mainly through the following four ways: Demonstration effects, competition effects, correlation effects and human capital flowing effects. Domestic investment mainly includes two types of investment, one is extension reproduction, and the other is connotation reproduction. Extension reproduction is one which expands production capacity and project benefit by additional investment or increasing the amount of labor under the condition of keeping production technology and organic composition of capital constantly. Connotation reproduction is one which expands the production scale depending on production technology, improving labor efficiency and the quality of production factors. This shows the root causes that distinguish extension reproduction from connotation reproduction are whether there exists technology progress or not in production methods. Extension reproduction can not bring technology progress, while connotation reproduction is the origination of technology progress in the domestic investment.Before the measurement for technology progress, we measure the change rate of total factor productivity (TF? P) by stochastic frontier production function method. The feature of stochastic frontier production function method is realized as two random parts, one is associated with technology inefficiency which interprets individual reasons, and the other is traditional random error which explains the external random factors. This setting can give interpretations for why individual enterprises can not achieve production frontier. According to the summary by Kumbhakar (2000) , if you have access to price information elements, stochastic frontier production function method that is based on panel data can decompose TF? P into four parts: frontier technological progress( FTP ),the change rate of relative technical efficiency( TE ), economies efficiency of scale( SE ) and allocation efficiency( AE ).When factor price is unknown, no matter allocation is efficient or not, the inefficient part can not be calculated. Based on this situation, we give an assumption thatλj = Sj, that means allocation is efficient, then we can get a simplified modelWe use time-varying translog production function which proposed by Christensen(1971) as specific production function. This model considers not only affection of factors to productivity, but also the time trend factor. In the form of Combined with equation above, we can calculate FTPit , T?E it and SEi t, finallyWe use panel data of 28 sectors of manufacturing from 1996 to 2008 to estimate parameters by FRONTIER4.1, and calculate TF? P of 28 sectors of manufacturing according to parameters estimation. The results show that (1) in the 12 sectors such as agriculture food processing industry, FTP makes large contribution for TF? P, surpass 100%, it means in the those sectors the obstruction to TF? P which SE provides is even more than the promotion TE brings; (2) in the 13 sectors such as food manufacturing sector, besides larger promotion by FTP , TE also make an additional promotion after overcoming the obstruction brought by SE . (3) in the 3 sectors such as furniture manufacturing sector, SE plays a positive role for TF? P, while it also leads a low promotion for FTP to TF? P, the average contribution is less than 70% and there is still a gap compared to other sectors.With a restriction of the sectors FDI data of manufacturing, we use panel data of domestic and foreign investment to study impact the two factors on technology progress. As TF? P is a changing index with time, the more time, the more precise, so we use relative data from 1996 to 2008 to estimate TF? P. Take TF? P being a relative volume into account, yet TE and SE is absolute volume, we take the summation of TE and SE in 2001 as the base amount to adjust technology progress in other forward years. Adjusted as follows:And so on we can obtain technology progress of every year from 2001 to 2007.From the perspective of the data structure, we can see that the data of technology progress is a form of cross-sectional data combined with time series data. Under this condition, Panel Data measurement model is a suitable choice. By tests, we choose variable coefficient fixed effect Panel Data modelUsing EViews6.0 to estimate parameters, the results show: (1) in the 28 sectors of Chinese manufacturing, apart from non-ferrous metal smelting and pressing industry, in the 11 sectors such as agriculture food processing industry, domestic investment has significant affection on technology progress; in the 11 sectors such as beverage manufacturing is on the contrary, in the 5 sectors such as tobacco industry, domestic and foreign investment impose on technology progress significantly. Therefore, it shows that Chinese manufacturing technology progress originate from domestic investment or foreign investment, even both two. It proves the theoretical expectations that domestic investment and foreign investment are the significant factors in technology progress and the source of technology progress; (2) with the industry characteristics of high openness, low industry concentration and low proportion of state capital, that at a low competition level and also keeping a high proportion of foreign investment to domestic investment, technology progress tend to originate from domestic investment. Otherwise, technology progress tend to originate from foreign investment.