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Will “Twisted Hand” Worsen the “Cost Disease”?——Measurement and Analysis of Decomposition Framework Based on Economic Growth

【Authors】
SONG Jian, WANG Jing
【WorkUnit】
SONG Jian(Nanjing University, 210093)
WANG Jing(Nanjing Audit University, 211815)
【Abstract】

This paper uses Massell growth decomposition model to construct an accounting framework based on total output production function. We separate the “cost disease” and the “structural bonus” from the labor factor reallocation and further analyze the impact of industry resource misallocation on overall TFP. (1) The marginal labor output ratio of agricultural sectors is lower than that of non-agricultural sectors and more labor flows out of the agriculture. The distortion of factors reduces the transfer-out rate of agricultural labor and inhibits the “transfer-out effect” of agricultural labor to a certain extent, especially in the central and eastern part. (2) The “transfer-out effect” of labor from industry to service has a negative contribution to TFP. The phenomenon of “cost disease” has appeared since 1992 and has been growing continuously in the economic cycle. (3) There is an obvious “structural bonus” in agricultural labor, which is higher than the “cost disease” effect brought by the rising share of service industry. The overall economy still shows a “structural bonus”. We further find that the distortion of factors hinders the transfer of labor to non-agricultural and weakens the “transfer effect” of agricultural labor. The distortion of factor prices leads to the rise of service product prices, which makes the phenomenon of “cost disease” more obvious and not conducive to the promotion of TFP, while economic growth depends more on labor quantity effect. The research results are of great enlightenment for our country to further improve the market economy, adjust the industrial structure, optimize the allocation of resources and release new impetus to economic growth.

JEL: L16, C23

【KeyWords】
Misallocation, Marginal Productivity, Industrial Structure, Structure Bonus, Cost Disease