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Prioritizing Upgrading Traditional Industries or Cultivating Advanced Industries?The Strategic Industrial Choice in a New Round of Technological Revolution

【Authors】
SUN Zao, XU Xuelu
【WorkUnit】
Xi'an Jiaotong University, 710061.
【Abstract】

Under the impact of a new round of technological revolution, a new pattern of international industrial division of labor is taking shape. As a rapidly rising power, it is unrealistic for China to maintain its status as a world-leading producer and exporter by continuing to rely on the transformation and upgrading of traditional industries. Based on Helpman et al.(2004), this paper introduces the information of technology distribution of enterprises, and describes the mechanism of enterprise redistribution effect and government R&D expenditure crowding-out/in effect to determine potential output by influencing traditional and advanced industries. In this paper, the enterprises are effectively divided into advanced enterprises and traditional enterprises according to the national high and new technology industry identification method, and the enterprise data are aggregated at the provincial level to reflect the dynamic changes in traditional and advanced industries. This paper proves that the crowding-out effect of government R&D investment focusing on technological upgrading of traditional industries will be greater than the redistribution effect of enterprises in traditional industries, which is not conducive to long-term growth; government R&D investment focusing on cultivating advanced industries can narrow the gap between actual output and potential output and achieve long-term economic growth through the crowding-in effect of advanced industries and enterprise redistribution effect. The focus of China's industrial strategy in the new era should be to accelerate the cultivation of advanced industries, promote the upgrading of industrial structure, seize the commanding heights in the new international industrial division of labor, and provide strong industrial support for sustained and stable economic growth.

JEL:C33, H32, L60

【KeyWords】
Traditional Industries, Advanced Industries, Potential Output, Industrial Strategy