What Factors are Crucial to Chinese Economic Growth? A Study Based on DEA and Panel Data

Abstract

This paper estimates total factor productivity of Chinese economy with a DEA Malmquist approach. The productivity is then used as a representative of technological progress in a growth model. The growth model analyse the effects of capital, labour, technology, globalisation, marketization and infrastructure on economic growth, based on provincial panel data. It is found that after 2002, productivity of Chinese economy reaches a positive growth rate and has a positive and relatively large output elasticity (0.54) for the economic growth. Technical change is a major contributor to the productivity growth. However, technical efficiency does not demonstrate significant growth during the focal period. The analysis also reveals that Chinese economic growth in the past years was mainly capital-driven, with a largest output elasticity of 0.61 and high growth rates of capital formation. The elasticity of labour, 0.47, is significantly large too, partially due to the migration of rural workers from agricultural sectors to industrial sectors and the improvement of labour quality. Infrastructure also has a positive impact on economic growth. The impacts of globalisation, marketization and FDI are insignificant.