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Abstract: In this paper, we performed an empirical study on the TFP effect of structural transformation based on panel data of economic growth in 169 countries across the world. Our findings are threefold: First, structural transformation has an inverted U-shaped effect on TFP. When the degree of structural transformation is on the left side of the inflection point, structural transformation is conducive to softening industrial structure and inducing TFP; when the degree of structural transformation is on the right side of the inflection point, structural transformation will induce industrial hollowing out and inhibit TFP. Second, since the reform and opening up program was launched in 1978, China's structural transformation has evolved from the stage of adaptation to the stage of strategic adjustment with an increasingly evident trend towards a service-based economy, but structural transformation remains on the left side of the inflection point of the inverted U-shaped curve, i.e. the TFP effect of structural transformation is positive. Third, TFP improvement lies at the heart of high-quality development. In pursuing high-quality development, China should lower growth rate expectations, attach greater importance to supply-side structural reforms, and accelerate structural transformation to promote TFP improvement.
Keywords: Economic growth, structural transformation, TFP, high-quality development
JEL Classification Codes: O14, O25, O47
(ProQuest: ... denotes formulae omitted.)
1.Introduction
Since the reform and opening up program was launched in 1978, China's economy has maintained rapid investment-driven growth under a "catch-up strategy" over the past four decades. According to Barro (2016), China's economic growth could not permanently deviate from the global historic experience of "regression to the mean," and its annual average growth rate would quickly fall into a range of 3% to 4%. This forecast is questionable since China's economic growth is subject to institutional strengths and other factors, and any assessment of China's long-term economic performance without those factors taken into account could be biased (Cai, 2016). Overall, China's economic growth appears to follow the possible trend shown in Figure 1, i.e. moving from Quadrant I with rapid yet poor quality growth to Quadrant II with slower growth and modest quality. At this moment, economic growth faces two prospects: It may move from Quadrant II to Quadrant III, where economic growth turns upward and becomes stable with higher quality, but...