Research On The Scale Compensation And The Output Elasticity And Substitution Elasticity Of China 's Automobile Industry

The automobile industry is the synthesis of a country’s industrial levels. The chain effect of automobile industry is very significant, which has a long industrial chain, a strong correlation, and other oriented characteristics. So, many countries put the automobile industry as their pillar industries, and the development of the automobile industries have been the dreams of many developing or less developed regions. The automobile industry of China has developed for half a century and become the world’s largest automobile producer, and the automobile industry is also very important in the national economy. However, with a very significant economy of scale, the automobile industry demands high in scales. Many past researches show that Chinese automobile industry has always been with a decreasing returns to scale, but a further study on it is still needed.For studying the automobile industry, this paper reviews the history of the Chinese automobile industry first. After known the formation and development of the automobile industry, I established the direction of the research, and based on it, I have read many relevant literature books related to production theory and return to scale of the automobile industry. Because the automobile industry demands high in scales, some empirical research should be done on the return to scale, substitution elasticity, and output elasticity of the Chinese automobile industry. While the Translog production function model is a model which is easy to estimate, has a strong tolerance and variable elasticity, so it takes a large advantage when studying the return to scale and elasticities. Based on the study of the theories and the application directions of the automobile industry, this paper takes Chinese automobile industry as the research object, uses the Translog production function model, and fits and simulates the model with the data of Chinese automobile industry and other related variables between 1992 and 2012. At last, with all studies above, I did the empirical analysis on the output elasticity of Chinese automobile industry’s inputs of labor, capital and the substitution elasticity between each other and the situations of the automobile industry’s scale reward.Finally this thesis gets the following conclusions: First, the technical change of Chinese automobile industry is not Hicks-neutral, this shows that the technical change in the automobile production process plays a relevant role in increasing the output. Second, from the overall perspective, the output elasticity of Chinese automobile industry’s input labor is increasing year by year, and the output elasticity of capital is decreasing year by year, and the substitution elasticity between them has a decreasing trend, which shows that the isoquant becomes more and more steep. In order to reach the same yield, the input of labor and capital becomes more and more difficult to alternative investment. Third, in our study period, the scale elasticity of Chinese automobile industry is significantly less than one, and generally showed a decreasing trend, which shows Chinese automobile industry is in the state of decreasing returns to scale. The trend of decreasing scale elasticity goes further, that is to say, the Chinese automobile industry still has much room for improvement with today’s technology, labor and capital in the ciicumstances.