Econometric Analysis Of The Determinants Of Economic Growth In China:1980-2008

Economic growth is the process by which a nation’s wealth increases over time. The most widely used measure of economic growth is the real rate of growth in a country total output of goods and services. The rate of economic growth is influenced by natural resources, human resources, capital resources, and technological development in the economy along with institutional structure and stability.Few other countries have been able to match the pace of China’s sustained economic growth. The growth domestic product (GDP) increased, on average, more than8percent annually since1980. China has become a major player in the global economy.In this paper we seek to determine the variables which are really correlated with growth in China during the period1980-2008. Therefore, the objective of our proposed econometric analysis of the determinants of economic growth in China has been determined by some of the factors which influence the economic growth in China. So, we use the econometric model "Stepwise Regression" to find the best model and the best predictor variables which are significant. This method allows us to include regression models in which the choice of predicative variables is carried out by an automatic procedure.In complex regression situations, when there is a large number of explanatory variables which may or may not be relevant for making predictions about the response variable, it is useful to be able to reduce the model to contain only the variables which provide important information about the response variable. However deciding which explanatory variables to include in the simpler model is not always trivial.Stepwise regression is a systematic method for adding and removing terms from a multilinear model based on their statistical significance in a regression. The method begins with an initial model and then compares the explanatory power of incrementally larger and smaller models.The stepwise regression procedure is useful when the number of explanatory variables in the maximum model is large-otherwise, then a procedure involving a careful analysis of all possible models is the most sensible selection procedure to use.Finally, we see that using the stepwise regression contributes to find the determinants which identifies benefits of economic growth in China and includes investment, exports, consumption, government revenue, total employment and population growth.