The purpose of this paper is to set up a growth model for a world city, in order to determine the roles of government and enterprises. With the model, the authors of this paper want to test the efficiencies between governmental and enterprise investment for the experience of Beijing.
The paper proves the contributions of enterprise and governmental investment for a world city by three assumptions. It then sets up a growth model for a world city by taking the variable of governmental investment instead of the labor variable in the Solow Growth Model. With C‐D function, the paper sets up an empirical growth model of the world city of Beijing by ordinary least squares (OLS) regression.
Results of OLS show that the elasticity of enterprises operating surplus to world city growth is bigger than the one of governmental expenditure to world city growth, which indicates that the investment ability of the private sector has more efficient effectiveness on a world city than governmental investment. Meanwhile, technological progress also has weak effectiveness for world city growth from the regression of C‐D function.
When the public and private sectors were taken into account for world city growth, the role of government investment is constructing a fair environment for enterprises' competition and encouraging innovation in the private sector, as well as enhancing efficient policy for innovation application in the private sector.
The paper sets up a growth model with the variables of private and public factors taking the place of the variable of labor in the Solow Growth Model with government investment. The model can be adopted to explain the dynamics of world city growth in a transition economy.
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