Improvement in Capital Quality from Perspective of Embodied Technical Change

Frontier research concentrates more on the contribution of capital investment to economic output,but prevalently ignores the impact of changes in capital quality on output.Aiming at the limitations on calibrating capital quality and technical change quantitatively,this paper adopts production function method based on nonlinear seemingly unrelated model to measure the embodied technical change embedded in capital accumulation process.We show that during 1980to2012,embodied technical change boosts capital quality improvement at rate of 2.88% annually.The improvement of economic efficiency in China is stemmed from total factor productivity(TFP)featuring in disembodied technical change,simultaneously is beneficial from capital quality improvement of equipment as well.