The Influence of Factor Price Distortions on Economic Structure – Based on Time-Varying Elasticity Production Function Model
Shangfeng Zhang, Qi Fang, Huiru Ren, Chun Zhu, Jingjue Xu, and Lang Hu
College of Statistics and Mathematics, Zhejiang Gongshang University
18 Xuezheng Street, Xiasha Education Park, Hangzhou, Zhejiang 310018, China
Based on the time-varying elasticity production function model, we calculate factor price distortions, and study their influence on the rationalization and optimization of industrial structure. We find that the impact coefficient of capital, and labor factor price distortions on the rationalization of industrial structure are −1.2087 and −0.3147 respectively. Additionally, the impact coefficients on the optimization of industrial structure are −0.2333 and −0.0718 respectively. These results demonstrate that capital and labor factor price distortions are significantly negative for the rationalization and optimization of industrial structure. Therefore, it is imperative to reduce factor price distortions, and support industrial structure upgrades to promote supply-side structural reform.
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