China's Service Industry Growth Mechanism Research

The service sector plays an important role in the economic development ofdeveloped countries after World War II. And the service sector is considered as theengine which promotes the growth of economy and solves the employment problem.However, as more and more in-depth studies，the hypothesis has been challenged.Baumol，who f‘ind the theory of cost disease’ according to the unbalanced growththeory, suggest that the servi’ce industrys labor productivity growth rate lagging andworkers continuing to transfer to the service sector makes the cost of the serviceproducts rise，and slows the pace of economic growth in the community as a whole.Chinese service industry has made a considerable progress since1978. The addedv’alue of service industrys proportion of GDP increased from23.94%in1978to43.14%in2010. The number of employees of the entire society also increased from12.18%to34,6%. With the rapid growth of service industry, some scholars found thatsome provinces and cities of eastern part has ’cost disease’ symptoms‘. The costdi’sease brings financial pressure, and the rising cost of education and health care,causes the stagnation of the labor productivity growth and stagnation of the entiresocial-economic growth, all these symptoms will restrict the development of theregion. Wwill explore the growth mecha’e nism of Chinas service industry growth andanalysis the symptoms of ‘cost di’sease，and try to put forward the development ofChina’s service industry in this article.Firstly, reviewing and summarizing the theory of economic growth. The classicaltheory of economic growth, neo-classical economic growth theory and new growththeory account the level of economic growth from the factors of production inputs andtechnology, while ignoring the differences between the various branches of production.Unbalanced growth theory divides the socio-economic production sector into twodifYerent d^”epartments-progressive sector and “stagnation sector”，and the theory isthat people on the economic production and economic growth of the demand for theproduct structure will produce impact. According to the unbalanced growth theory,Baumol found th’e "cost disease theory. It suggest that the growth of service is causedby the increase in labor cost in services.Then, we do some research on Chi’nas service sector growth mechanism atferreviewing the theory of economi’c growth. First. Chinas service industry developmentstatus of the internal structure and regional development, and then analyzed accorfingto the classification standards of the foreign service industry, service industry growth in China the dominant factor at this stage of China’s service industry growth wasmainly demand-driven. Finally, the provinces and cities in-depth analysis will be done,the assume of the ‘stagnant sector，is reasonable, while some provinces and cities inChi’nas services have ‘cost disea’se symptoms.Following We do empirical research on the influencing factors of the services‘cost disease’. Using the difference between the service sector wage growth rates andservices labor productivity growth rate as a measure of the standard of ‘cost dise1ase.The explanatory variables are the level of industrial development, people’s livingstandards, trading in goods net exports and the level of urbanization. The empiricalstructure shows that the level of industrial development for the services ’cost disease’is not significant, net exports and ‘cost disease’ is negatively related and relationshipbetween the level of urbanization and living standards and ‘cost dise’ase is positive.The end of the paper puts forwards some suggestion for the development ofChina’s service industry. On the one hand, the development industry for the,suppression of the services ‘cost disease the negative impact on the economy wouldhave a negligible role in the industry can not only bring about improvements intechnology, industrial development will more labor constraints in the industrial sector,making the flow of the service sector labor force relatively reduced, and then will playa vital role in diagnosis and treatment services ‘cost dise’ase; to regulate people’sconsumption structure to change the labor force excessive too much liquidity to theservice sector, while eliminating the numbness urbanization, inhibit the excessivegrowth of the cost of service offerings, and to alleviate the financial pressure of theeducation，health care and other public services spending.According to my ability and time，there are some inadequate and ill-consideredin this study. Which measure service ‘cost disease’ problems resulting model fit is nothigh. Furthermore, due to over-emphasize the impact of the social labor productivitygrowth to economic growth while ignoring other influencing factors, and finally to theultimate goal of economic growth give up the consideration of consumer well-being.Please experts and teachers to correct the mistake and inadequacies.