Will Market-Oriented Reforms Propel Technology Progress?

Dai Kuizao (戴魁早)1* and Liu Youjin (刘友金)2

1 Empirical Evidence from China’s High-Tech Sectors

2 Business School, Hunan University of Science and Technology, Xiangtan, China

Abstract: This paper aims to explore the effects of market-oriented reforms on industrial technology progress. Based on a theoretical analysis, we performed an empirical study with a marketization index and panel data of high-tech sectors in China. We found that market-oriented reforms had significantly propelled technology progress in China’s high-tech sectors, and the effects became more evident after China’s WTO entry. Market-oriented reforms induced technology progress by increasing capital allocation efficiency, R&D input, and technology diffusion. Among various aspects of market-oriented reforms, the institutional environment exerted the most significant effects, followed by the economy’s non -s ta te sec tor, produc t marke t deve lopmen t , and fac tor marke t deve lopmen t ; the government-market relationship index influenced technology’s progress the least. The effects are heterogeneous across sectors with different technology attributes and more significant for technology-intensive sectors. Our findings offer policy implications for China’s ongoing market-oriented reforms and policy design for technology progress in high-tech sectors.

Keywords: market-oriented reforms, technology progress, transmission mechanism, high-tech sectors

JEL Classification Code: O30, P30, L60

DOI: 10.19602/j.chinaeconomist.2021.07.07