Table Of ContentJianhua Liu · Zhaohua Jiang
The Synergy Theory
on Economic Growth:
Comparative Study
Between China and
Developed Countries
The Synergy Theory on Economic Growth:
Comparative Study Between China and Developed
Countries
Jianhua Liu Zhaohua Jiang
(cid:129)
The Synergy Theory
on Economic Growth:
Comparative Study Between
China and Developed
Countries
123
Jianhua Liu Zhaohua Jiang
Schoolof ManagementEngineering Faculty of Humanities andSocial Science
ZhengzhouUniversity DalianUniversity ofTechnology
Zhengzhou, Henan,China Dalian, Liaoning, China
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Preface
Over the past thousands of years of human civilization, the average annual eco-
nomic growth of more than 2% only happened in western developed countries
(such as the United Kingdom, France, Germany, the United States, and other
countries) in the past 200 years. Prior to this, every country’s economy often
developed at a very low growth rate. China’s high growth after the reform and
opening up is a miracle in the history of human economic development.
Howtoexplaineconomicgrowth,oranalyzeeconomicgrowthquantitatively?In
economics,ithasstartedsincetheclassicaleconomicgrowththeoryofAdamSmith
and David Ricardo, who put forward the classical labor value theory. Marx’s Das
Kapitalandlaborvaluetheorypavedthewayforaquantitativeanalysisofeconomic
growth.Then,Keynesputforwardthefour-sectortheoryofthenationaleconomy.On
thebasisofthistheory,HaroldandDomarestablishedtheeconomicgrowthmodelof
capitaldeterminism.Then,Solowemphasizedtheroleofscientificandtechnological
progress based on the four-sector theory of Keynes, although the scientific and
technological progress is only a “surplus” in his opinion. In the 1980s, the
Arrow-SheshinskimodelandnewgrowththeoriesofRomer,Lucas,andSchumpeter
began tobe themainstream. These theories generally emphasized therole ofinno-
vation in economic growth and weakened the role of capital, resulting in a lot of
controversies.Forexample,Jorgenson’seconomicgrowththeoryisinclinedtocapital
determinism. On the other hand, Coase and North’s new institutional economics
theoriesandmethodshavealsobeenintroducedintothestudyofeconomicgrowth.
Now,therearelotsofproductionfunctionsandeconomicgrowthmodelsinthe
internationalacademiccommunity.Thescholarsstudyeconomicgrowthfromtheir
own perspectives and on some theoretical basis. As a result of the authors’
exploration over the years, this book analyzes a dozen countries’ drivers of eco-
nomic growth from the perspective of the synergy theory. In terms of theoretical
basis, the economic growth models are established, and the empirical results of
more than a dozen countries are analyzed. The synergy theory neither tends to
capital determinism nor to innovation determinism. It tends to show that material
capital, human capital, science and technology, institution, labor force, and the
economic environmental externalities determine economic growth together. Of
v
vi Preface
course, the contributions of these factors in the economic growth are different in
different countries and periods. For example, since 1982, the contributions of
technological innovation (scientific and technological progress), human capital
innovation (improvement of per-capita years of schooling), and institutional inno-
vationhavebeenmorethan60%intheUnitedStates.Therefore,theUnitedStates’
economy is driven by innovation. From 1978 to 2000, the contribution of capital
(physical capital stock and investment in physical capital) to China’s economic
growth was 53% while from 2001 and 2012, this number reached 78%.
This book makes a comparative study of economic growth in China and 14
developedcountriesoverthepastdecades,andalsobuildsatheoreticalframeworkof
synergytheoryofeconomicgrowth.Subsequently,onthebasisofthedetaileddata,
thisbookestablisheseconomicgrowthmodelsforthe15countriesandmeasuresthe
contributionofphysicalcapitalstocks,investmentinphysicalcapital,labor,science
and technology, institutions, and economic externalities to the economic growth
ofthesecountriesrespectively.Furthermore,itsummarizestheexperiencesofeco-
nomic growth among these countries over the past decades, such as United States,
Japan,theUnitedKingdom,SouthKorea,andSingapore.Andbasedonthesynergy
theory, this book also establishes dynamic stochastic general equilibrium model
groupsforeconomicgrowthinSouthKoreaandChina,andstudiestherelationship
amongscienceandtechnology,economy,andecologicalenvironmentintheprocess
of structural reforms (such as urbanization, informatization, and industrialization),
whichfurtherexpandstheresearchscopeofeconomicgrowth.Onthebasisofstudies
mentioned above, this book conducts anew analysisof China’sgradual dual-track
systemreform,structuralreform,andinnovation-drivenstrategy.
This book is the result of a project of the Henan Department of Science and
Technology, a project of the Henan Department of Transportation, a project of the
National Natural Science Foundation of China, a project of Innovation working
methodologyofMinistryofScienceandTechnologyofChina,aprojectoftheState
Intellectual Property Office of China, a key project of the Chinese Academy of
Engineering, a key project of the National Social Science Fund of China, and
projects of the National Natural Science Foundation of China.
Thisbookistheresultofthecooperationamongtwoteachersandsomestudents
over the years. Meng Zhan, Ma Jiao, Li Wei, Pan Song, Ma Ruijundi, Wang
Mingzhao,PuJunmin,ObaidUllah,WangXianwen,YangMing,JiangChaoni,Xu
Guoquan, Li Yafei, etc., as graduate students, participated in the studies. In addi-
tion, Dr. Hu Mingyuan from the School of Public Administration, Tsinghua
University, Prof. Wang Jinfeng from the School of Management Engineering,
Zhengzhou University, Prof. Yang Mingxing from the School of Foreign
Languages, Zhengzhou University, and Mr. Chen Zhongwu from the Mount Song
Think Tank also participated in the writing and translation of this book. Thanks
againforguidanceandsupportfromleadersandteachersofZhengzhouUniversity
and Dalian University of Technology.
Zhengzhou, China Jianhua Liu
Dalian, China Zhaohua Jiang
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Proposition of the Problem. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Literature Review on Economic Growth . . . . . . . . . . . . . . . . . . . 2
1.2.1 Harrod-Domar Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2.2 Solow-Swan Model and Production Function Method . . . . 4
1.2.3 New Growth Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.3 StudiesontheRelationshipBetweenInstitutionalInnovationand
Economic Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.3.1 The Studies of the Relationship Between Institutional
Change and Economic Growth: from Kuznets to
Acemoglu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.3.2 Chinese Scholars’ Studies on the Relationship Between
Economic Growth and Institutional Innovation . . . . . . . . . 23
1.4 The Analysis of Mapping Knowledge on the Evolution
of Economic Growth Theory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.4.1 Main Representative and Their Important Works. . . . . . . . 29
1.4.2 Development Vein of Economic Growth Theory . . . . . . . . 29
1.5 The Inclusive Evolution of Economic Growth Model . . . . . . . . . . 30
1.5.1 Evolution Type of Scientific Theory . . . . . . . . . . . . . . . . . 30
1.5.2 Inclusive Evolutionary Tracks of Economic Growth
Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.6 The Structure of Economic Growth Model and Its Methodology
of Evolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
1.6.1 Structure of Knowledge System . . . . . . . . . . . . . . . . . . . . 39
1.6.2 Multiform Models of Economic Growth Theory . . . . . . . . 41
1.6.3 Construction of Economic Growth Model . . . . . . . . . . . . . 45
1.6.4 Conceptual Coordinate System of Economic Growth
Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
1.6.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
vii
viii Contents
1.7 The Methods and Innovations of the Research . . . . . . . . . . . . . . . 50
1.7.1 Research Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
1.7.2 Innovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2 The Synergy Theory of Economic Growth . . . . . . . . . . . . . . . . . . . . 57
2.1 The Determining Factors of Economic Growth. . . . . . . . . . . . . . . 59
2.1.1 Many Determining Factors of Economic Growth. . . . . . . . 59
2.1.2 The Role of Institutional Innovation . . . . . . . . . . . . . . . . . 62
2.1.3 Externalities of Economic Environment. . . . . . . . . . . . . . . 66
2.2 The Synergy Theory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
2.2.1 Synergy of Innovation and Investment . . . . . . . . . . . . . . . 69
2.2.2 Meaning of Synergy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
2.2.3 Foundation of Synergy. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
2.3 The New Model of Economic Growth. . . . . . . . . . . . . . . . . . . . . 74
2.3.1 Income Decomposition Method . . . . . . . . . . . . . . . . . . . . 74
2.3.2 Decomposition of Economic Growth Rate. . . . . . . . . . . . . 78
2.3.3 Steps of Calculating the Contribution of Various Factors
to Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
2.4 Three Hypotheses of Economics and the Problems of
Endogenous Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
2.4.1 Three Hypotheses in Modern Economics . . . . . . . . . . . . . 80
2.4.2 The “Three Hypotheses” of Economics from the
Perspective of the Synergy Theory . . . . . . . . . . . . . . . . . . 83
2.4.3 Endogenous Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
2.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
3 The Calculation and Empirical Analysis on the Contribution
of Institutional Innovation to Economic Growth. . . . . . . . . . . . . . . . 91
3.1 The Method of DEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
3.1.1 C2R Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
3.1.2 Calculation Formula for the Contribution of Institutional
Innovation to Economic Growth. . . . . . . . . . . . . . . . . . . . 93
3.2 The Role of Institutional Innovation in Promoting Britain’s
Economic Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
3.2.1 Thatcher’s Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
3.2.2 “The Third Way” Reform of Blair Government. . . . . . . . . 101
3.3 The Analysis of the Role of Institutional Innovation: China’s
Reform and Opening Up Policy . . . . . . . . . . . . . . . . . . . . . . . . . 102
3.4 Stratification and Types of Institutional Innovations . . . . . . . . . . . 103
3.4.1 Stratification of Institutional Innovation. . . . . . . . . . . . . . . 103
3.4.2 Types of Institutional Innovations. . . . . . . . . . . . . . . . . . . 105
3.5 The Relationship Between the Cycle of Resource Allocation,
Efficiency of Production Factors and the Business Cycle. . . . . . . . 108
Contents ix
3.5.1 Overview of the Business Cycle Theory . . . . . . . . . . . . . . 109
3.5.2 The Cycle Theory of Institutional Innovation . . . . . . . . . . 114
3.5.3 The Econometric Test of the Relationship Between
the Cycle of Resource Allocation Efficiency
of Production Factors and the Business Cycle . . . . . . . . . . 116
3.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
4 The Calculation of the Contribution of Science and Technology
Progress and Human Capital to Economic Growth . . . . . . . . . . . . . 121
4.1 The Calculation of the Contribution of the Science and
Technology Progress: The Case Study of South Korea . . . . . . . . . 121
4.1.1 The Function Model of Compensation of Employees. . . . . 121
4.1.2 The Function Model of Investment Value . . . . . . . . . . . . . 123
4.1.3 Overall Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
4.1.4 The Calculation Formula for Contribution of Science
and Technological Progress to Economic Growth . . . . . . . 124
4.1.5 Calculation Result and Analysis . . . . . . . . . . . . . . . . . . . . 125
4.2 The Calculation Results of the Contribution of Human Capital
Innovation to Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . 127
4.2.1 Calculation Methods for the Contribution of Human
Capital Innovation to Economic Growth . . . . . . . . . . . . . . 127
4.2.2 Calculation Formula for the Contribution of Human
Capital Innovation to Economic Growth . . . . . . . . . . . . . . 128
4.3 Dynamic Stochastic General Equilibrium Model for South
Korea’s Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
4.3.1 Model Group of South Korea’s Economic Growth . . . . . . 129
4.3.2 Logarithm Linearization and Parameter Solving
of Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
4.3.3 Simulation Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
4.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
5 The Analysis on the Factors of Economic Growth in the United
States and Other Developed Countries . . . . . . . . . . . . . . . . . . . . . . . 145
5.1 Research on the USA Economic Growth and Transformation
Since 1900. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
5.1.1 ResearchesRelatedtotheAnalysisonEconomicGrowth
Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
5.1.2 The Measurement of America’s Economic Growth
in Recent Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
5.1.3 TransformationofDevelopmentModeintheInnovation-
Oriented Country and the United States . . . . . . . . . . . . . . 153
5.2 The Calculation and Analysis of Japanese Economic Growth . . . . 154
x Contents
5.2.1 Japanese Economic Growth Model. . . . . . . . . . . . . . . . . . 154
5.2.2 Analysis of Reasons for Japanese Economic Recession
Since 1990s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
5.3 The Analysis of the Factors Affecting Germany’s Economic
Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
5.3.1 Correlation Study on Germany’s Economic Growth. . . . . . 162
5.3.2 German “Economic Miracle” and the Recession . . . . . . . . 163
5.3.3 Slow Economic Growth and the Decline of Investment
in Physical Capital in Germany . . . . . . . . . . . . . . . . . . . . 165
5.3.4 Analysis for the Reasons of the Slow Growth
of Germany’s Domestic Investment . . . . . . . . . . . . . . . . . 167
5.4 The Analysis of the Factors Affecting Singapore’s Economic
Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
5.4.1 The Relative Study on the Economic Growth
of Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
5.4.2 Analysis on the Motive Force of Singapore’s Economic
Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
5.4.3 Double Driven Capital-Innovation Mode of Singapore’s
Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
5.4.4 Policies to Promote Innovation and Transformation . . . . . . 179
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
6 The Calculation of China’s Economic Growth Factor . . . . . . . . . . . 185
6.1 The Studies on China’s Economic Growth. . . . . . . . . . . . . . . . . . 185
6.1.1 Estimate of Different Scholars . . . . . . . . . . . . . . . . . . . . . 185
6.1.2 Research on the Contribution of Institutional Innovation
to China’s Economic Growth . . . . . . . . . . . . . . . . . . . . . . 187
6.2 China’s Economic Growth Model and the Analysis of Factors
Affecting Economic Growth from 1953 to 1976. . . . . . . . . . . . . . 191
6.2.1 China’s Economic Growth Model. . . . . . . . . . . . . . . . . . . 191
6.2.2 Analysis of China’s Economic Growth Factors . . . . . . . . . 192
6.3 China’s Economic Growth Model and Accounting from 1977
to 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
6.3.1 Construction of China’s Economic Growth Model. . . . . . . 193
6.3.2 China’s Economic Growth Factors . . . . . . . . . . . . . . . . . . 194
6.3.3 Discussion About Calculation Results. . . . . . . . . . . . . . . . 196
6.4 The Selection of Time-Series Data for R&D Expenditure . . . . . . . 197
6.4.1 Considerations on Data Selection . . . . . . . . . . . . . . . . . . . 197
6.4.2 The Autocorrelation of Time-Series Data for R&D
Expenditure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
6.5 The Test of Economic Growth Model . . . . . . . . . . . . . . . . . . . . . 199
6.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
