Increasing returns is an important feature of the modern economy. Without increasing returns, there will be no sustained economic growth. Therefore, increasing returns have always been the focus of academic circles at home and abroad. In order to achieve sustainable development of China's economy in the future, it is necessary to transform the non-increasing returns growth model into an increasing returns model.
The development of the theory of increasing returns
Division of labor and specialization
Adam Smith, the founder of the theory of increasing returns, explained the consequences of increasing returns from the perspective of the enterprise. process, and put forward the theorem that the division of labor is limited by the scope of the market, that is, the division of labor in productivity is the main reason for the growth of wealth, and the new division of labor depends on the expansion of the market. The two combine to form a theory of growth that is self-sustaining by virtue of the continual introduction of new divisions of labor.
Young inherited Smith’s idea of ??division of labor and pointed out that the increase in returns is not caused by the scale of the factory or industrial part. He used concepts such as division of labor and roundabout production to explain the mechanism of returns to scale.
Marx attributed the increasing returns mechanism based on division of labor to the result of the cumulative interaction between labor force, means of production, and between labor force and means of production, that is, the savings caused by collaboration, the expansion of collective power and means of production The resulting economies of scope, as well as the increase in labor complexity and the continuous improvement of production materials caused by the cumulative effect of labor and production means.
Qian Shufa (2003) believes that there is a positive feedback mechanism of interactive enhancement between the deepening of the division of labor, the evolution of industrial organizations, and industrial or market scale returns.
Xia Rongpo (2008) discussed the dynamic increasing return mechanism in the spatial organization state of industrial agglomeration based on Smith's division of labor theory. The spatial organization system of industrial agglomeration can advance the innovation critical point in the dynamic revenue increasing mechanism through complete internal organization and information systems, thereby achieving continuous technological progress and the continuous evolution of division of labor, thereby completing the positive feedback of the dynamic revenue increasing mechanism. effect.
External economy
In the framework of neoclassical equilibrium, Marshall uses external economy to explain the mechanism of increasing returns. In Marshall’s view, increasing returns are caused by the external economy. In this case, increasing returns arise from spillover effects between firms in the same industry, while in other cases the market's price and competition mechanisms remain effective. Therefore, increasing returns and perfect competition are compatible with each other, and the growth of the external economy is the main source of increasing returns.
Sources of increasing returns from an external economic perspective include knowledge, human capital investment and technological innovation.
Arrow’s (1962) “Learning by Doing” model endogenizes the process of knowledge acquisition by those engaged in production into the model. It is a variant of the research and development model. He derived a production function with increasing returns to scale from the ordinary Cobb-Douglas regular model income production function of labor and capital. The externality illustrated by the Lucas (1988) model is the spillover effect of human capital. Nelson and Pack (1999) pointed out that when developing countries attract advanced foreign technologies, learning by doing plays an important and positive role in the accumulation of human capital in developing countries.
Romer (1990) is a synthesis of Romer (1986) and Lucas models. He divides knowledge into two categories, one is human capital, which is a "competitive product"; the other is technology. , it is a "non-competitive product". These two characteristics of knowledge mean that there are two sources of increasing returns to scale: specialization (increased number of product types) and spillover effects of knowledge and technology.
Ran Wenjiang and Feng Junwen (2003) analyzed the economic entropy and economic dissipation structure of the production system and proposed two models of technological innovation. They believed that technological innovation is the fundamental source of increasing economic benefits. It starts with research and development and finally reaches the market, and the cycle continues.
Shi Tao and Tao Aiping (2007) pointed out that changes in the relative proportion of the two major categories of basic production factors - tangible production factors and intangible production factors in the total production factors directly determine the direction of reward changes. Intangible factors The increasingly important position in production and its characteristics different from tangible factors make the law of increasing returns gradually become an important economic law in the era of knowledge economy.
Innovation Evolution
Schumpeter as the representative tried to explain increasing returns through innovation evolution. In Schumpeter’s view, the core of economic development is not equilibrium, but innovation, innovation. It refers to the introduction of a new combination of production factors and production conditions into the production system. As the "soul" of economic activities, the function of entrepreneurs is to realize innovation and introduce new combinations. Therefore, increasing returns arise from the "industrial mutation" in the innovation process. ” and “creative destruction.”
Professor Schultz also studied the sources of increasing returns in his work, including eight categories, namely: division of labor, specialization, technological progress, accumulation of human capital, economic ideas and knowledge , economic institutions, economic organization and restoration of economic equilibrium.
Empirical Research on Increasing Returns Theory
Davis and Weinstein (1999) tested whether there is an increasing return to scale phenomenon by estimating the relationship between expenditure changes and output changes in 13 OECD countries. . The output demand elasticity they estimated was 1.6, so they inferred that there were obvious increasing returns to scale.
Paul and Siegel (1999) used U.S. industrial panel data from 1979 to 1989 and confirmed that there are widespread economies of scale in U.S. industrial production.
Wang Junhui (2008) tested my country’s returns to scale from 1978 to 2004, and then used the Panel Data model to examine the returns to scale issues in five OECD countries. Research shows that whether returns to scale are constant or increasing returns to scale are often the research assumptions of many theoretical models. However, the assumption of constant returns to scale will lead to biased estimates of the actual contributions of factors. Therefore, the assumption of constant returns to scale is not suitable for analyzing modern economic development.
Wei Jie and Ren Baoping (2011) used data from 35 industrial industries from 2000 to 2008 to calculate returns to scale in China's economic growth, and analyzed the factors influencing China's increasing returns. , found that division of labor and technological innovation are still the core elements at this stage. China's economic growth model needs to shift to a mechanism driven by increasing returns. The most fundamental thing is the formation of a benign interactive mechanism between division of labor and technological innovation.
The Enlightenment of Increasing Returns on China’s Economic Development
(1) China’s economic development must focus on the evolution of division of labor and the improvement of specialization. The theory of increasing returns shows that division of labor promotes economic growth. Therefore, increasing returns based on specialized division of labor is one of the alternative paths to realize the country's leap-forward catch-up strategy. At present, my country's economy has problems such as regional and market segmentation and unclear division of labor among various departments. China will further break down regional and market segmentation and inter-regional trade blockades, and carry out reasonable division of labor among regions and industries by using comparative advantages. Continuously improve the level of division of labor and specialization in various fields, so that economic growth is based on the increasing returns brought about by the continuous evolution of division of labor, thereby achieving long-term economic growth and leap-forward development.
(2) Knowledge accumulation, human capital formation and technological innovation directly promote increasing returns. The development of China's economy depends not only on investment in machinery and equipment, but also on investment in intangible products such as education, training, human capital and technological innovation. It is necessary to continuously improve the education system and adjust the settings of educational institutions to make human capital more economic and social. Benefits can be realized smoothly, and enterprises are actively encouraged to train their employees' skills and encourage invention and innovation. Enterprises should create a good environment for the growth of talents and strengthen the technological and management innovation capabilities of enterprise talents. At the same time, the government must increase reforms in medical, education, social security and other systems to provide a guarantee mechanism for the improvement of national quality.
(3) China’s economic development requires attention to organizational changes and institutional innovation. The cause of increasing returns is the evolution of division of labor organizations. At the same time, technological innovation and institutional innovation are closely related. Therefore, institutional innovation plays an important role in the benign increasing returns mechanism. Effective institutional arrangements can provide incentive mechanisms and reduce transaction costs. It is necessary to reform my country's current inefficient and relatively rigid financing and investment system.
(Author’s unit: School of Economics, Anhui University)