Increasing Returns and the Sustainable Growth of China’s Economy

摘要

The diminishing marginal revenue of production factor is the main obstacle to economic sustainable growth. Increasing returns attributed to technological progress, human capital and improvement of the resources allocation efficiency is the key to solve it. Using the state panel data from 1998 to 2005 and total factor productivity decomposition methods, China's economic growth can be decomposed into the contribution of production factor input, human capital, technological progress and improvement of the resource allocation efficiency in this paper. The research indicates that capital inputs contribute most to China's total output, reaching 60%; the contribution of TFP is the second, reaching 35%; while labor inputs contribute little, only 5%. In all factors of TFP, the efficiency of resource allocation contributes most to total output, the technological progress contributes small and the human capital plays a negligible role in it. Therefore, the sustainable growth of China's economy depends on the improvement of human capital and technological progress in the role of output increase.