An empirical investigation of China’s construction industry development : shifts in factors of production usage from 1990 to 2014

Abstract

This paper analyzes the progressive evolution of the China’s construction industry over the past three decades through Cobbs-Douglas production function. Three distinct stages are identified: 'incubation period' from 1990 to 1997, 'growth period' from 1997 to 2008, 'maturity period' from 2008 to 2014. The relationship between construction output and its production input factors of labor, capital and technology, are explored and compared across the three different stages. In the earliest stage, construction depended heavily on a bountiful supply of cheap labor. As growth rates increased and prosperity improved, the industry began to attract private investment, further expanding the industry. However, with shrinking returns on construction projects now falling the industry is looking to technological solutions to boost construction value added. This study supports the view that the pursuit of greater efficiencies, at both firm and industry level, will be best served by investing in further technological advancement.