By Xuan Xiaowei, Department of Development Strategy and Regional Economy, DRC

Research report No.174, 2016 (Total 5057) 2016-12-13

Abstract: The performance of modern economic growth has been interpreted respectively by capital-based classical growth theory, technology-based endogenous growth theory and institutional factor-based new institutional theory. Adam Smith explained the significance of further labor division on capital accumulation, technological advance and labor productivity progress from the aspect of labor division. With regard to labor division theory, unlimited deepening of labor division is the primary cause for modern economic growth. The deepening of labor division seems to depend on market size, but behind it there are also profound influences like social differentiation form, social structure and national governance model. The pyramid structure of traditional social stratification differentiation and the governance model of functionally diffused style have fundamentally restricted the unlimited deepening of labor division and the sustainable growth of economy. In order to stride over the middle-income trap and enter the high-income society, China needs to gradually turn into a network-oriented social structure and employ a function-differentiation-style governance model.

Key words: further labor division, social structure, state governance