1.Research purposes
Generally speaking, there are three main factors that influence economic growth——capital investment, labor and total factor productivity (TFP).
Although China has gradually liberalized the one-child policy, but in the short term, China's population growth rate will not increase greatly, while with the increase of China's population aging trend, China's labor population ratio will continue to decline. Therefore, China‘s long-term growth of the economy cannot rely on the increase of labor force.
On the other hand, China's investment ratio (the proportion of total investment GDP) has ranked high in the world. The rapid growth of local government debt in China has become one of the factors which restrict economic development. Therefore relying on the increase of capital investment cannot promote the healthy development of economy.
In this context, improving the production efficiency which is measured by TFP is particularly important. There are numerous researches about TFP of China, while researches on TFP of a certain city are relatively few. Therefore, I choose to study TFP of Beijing which as capital of China is representative. 2.Definition and Model
To study the TFP and economy development in Beijing, I mainly use Solow residual method and Cobb-Douglas production function.
2.1 Solow residual method
Robert Solow defined rising productivity as rising output with constant capital and labor input. It is a "residual" because it is the part of growth that cannot be explained through capital accumulation or increased labor. The Solow Residual is sometimes called the rate of growth of total factor productivity.
2.2 Cobb-Douglas production function
The Cobb–Douglas production function is widely used to represent the technological relationship between the amounts of two or more inputs, particularly physical capital and labor,
and