A SYSTEM DYNAMICS MODEL
FOR ECONOMIC DEVELOPMENT OF OLD INDUSTRIAL CITIES
Pei Weimin and Li Yangsheng
Department of Automatic Control
Northeast University of Technology
Shenyang 110006,P.R.China
ABSTRACT.
This paper discusses the modeling problem for the economic. development of
the old industrial cities in China.A system dynamics model is applied to
analyse the recessionary causes of the old Industrial cities,and find the
possible strategies of the technical progress and economic development in
future. The paper gives the simulation results of an example,and discusses
the system structure with adding policy loops in the causal diagram.
INTRODUCTION
The economy of some industrial cities in China during the 1959s had got
rapid growth, but in recent years the difficulty has risen, it is that the
recession of the industrial production, the overstock of the products and
the decline of the economic results.
Because China is a developing country with the numerous population, the
pressure to the employment is very large. [It is impossible to carry out
the policy migrating population on a large-scale. In order to support the
numerous population, these cities only depend on the further growth of
their own economy. Therefore, it is necessary to analyse the causes of the
industrial recession,find the channel of promoting economy and formulate
the strategies of the future development about the old industrial cities.
This paper studies the economic development problem of the old industrial
cities in China using the qualitative and quantitative approach of system
dynamics, discusses the modeling problem of the system structure with
adding policy loops in the causal diagram.
CAUSAL ANALYSIS
The city is a typical complex system. The social, economic and
technological factors are interrelated closely. The inside structure and
outside environment of the city vary over time. Especially, improving an
old urban system is still more difficult than building a new urban system.
The developed process of the old industrial cities in China has following
character;
1) The industrial structure of the cities mostly took the energy—consuming
traditional industry as the leading industry, it resulted in the shortage of
the energy source and the pollution of the urban environment.
2) The development of the cities pursued the industrial growth
one-sidely,and neglected the coordinated development of the third industry.
Page 674
System Dynamics '91 Page 675
3) The population of the cities increased excessively,the quantity of the
workforce is numerous but their cultural quality is lower, therefore the
pressure to the employment is very large.
4) The cities was closed to the outside world in the long term, there is a
big gap between the technical competence of these cities and the foreign
advanced level.
In order to find the root causes of the economic decline of the old
industrial cities, the causal relation among natural resources, population,
technology and industrial economy are discussed as follows.
1-The Causal Relation of Resource and Economy
The economy of the old industrial cities In China usually developed on the
basis of the population and the natural resources. The growth of the urban
industry was restrained by the energy source, especially restricted by the
electric power.
On account of the technological and managemental causes, on an average,
the energy-consuming of unit product is one-two times larger than that
one of the industrial advanced countries.
Owing to the shortage of the energy supply, the production capacity of the
urban industry can not be utilized fully, thus it affects the profit and
the revenue.From the above mentioned,energy shortage + operation ratio >
output value + prafit + revenue +investment + production capacity +
energy demand which are connected in a causal loop, but also it is a
vicious circle, see Figure }.
INDUSTRY POLICY
1
; +
UNIT ENERGY ¢ = __ TEOHNOLOGY ¢ +. = ADIUSTMENT OF
CONSLMING REFORM INDUSTRIAL STRUCTURE
H +.
1 '
4
ENERGY DEMAND ——~» SUPPLY-DEMAND —+» OPERATION RATIO
RATIO \
+ t+ ;
ENERGY SUPPLY
F:
PRODUCTION + y OUTPUT VALUE
CAPACITY
t |.
INVESTMENT 4—————— REVENUE 4 PROFIT
Figure j. The causal diagram of energy and economy
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System Dynamics '91 Page 677
In order to extricate the cities froma difficult position, it. Is
necessary to make the industry policy correctly, and transform the
industry from a resource—dense type to a technology-dense type through
adjusting the industrial structure and reforming the traditional industry.
On the one hand it can reduce the energy—consuming of the unit product, on
the other hand it can raise the production capacity. As a consequence, the
economy system of the old industrial cities will come to the track of a
good circle through adding a policy feedback loop in Figure }.
2. The Causal Relation of Population and Econemy
The population of the old Industrial cltles In China has. increased
excessively, the workforce source Is rich but can not flowed, therefore
the pressure to the employment is tremendous.
In the past, the production funetion of the cities was emphasized
one~sidely, and the service function of the cities was neglected, the
third industry could not obtained the coordinated development. People
focused the employment on a few industrial departments, it results in a
decline in the labour productivity, see Figure 2.
INDUSTRY
POLICY
t
1
+ ‘
THIRD _____ + SCIENCE AND +, TEGNOLOGY
INDUSTRY EDUCATION OOMPETENCE
at Re it
SUPRLUS OUTPUT VALUE
i: '
! '
Hig ‘yl +*
EMPLOYMENT +. INDUSTRIAL -. LABOR
——> ——>
i
PRESSURE yO PRODUCTIVITY
+
| |.
URBAN FAMILY LIVING
POPULATION “= PLANING “377 _ STANDARD
Figure 2. the causal diagram of population and economy
In order to transform the unfavourable situation of the. workforce
employment, it is necessary to adjust the industry policy and develop the
third industry. The third industry can attract a great quantity of the
surplus workforce, thus reduce the pressure to the employment. In all
respect, it is possible to spur the technology progress, raise the labour
productivity, improve the living standard of the urban people, strengthen
the family planning and control the excessive increase of the urban
population.
3.The Causal Relation of Technology and Economy
Page 678 System Dynamics '91
Why the products overstocked in the old industrial cities? A direct cause
is that the products can not meet the needs of the domestic and overseas
market. This is ‘because these cities was in a closed situation from the
~outside world in the long term, the technology and management of the
industrial production full behind, see Figure 3.
ADVANCED
STANDARD
ye
DEPRECIATION ----*» TEGROLOGY 4 * pi ppERENcE
*
| Ps Te
! “S. TECHNOLOGY
1 S\ AGEING
H "goo
INDUSTRY TECHNOLOGY +. PRODUCT
POLICY COMPETENCE >> qua ity
ot t
2° Tea NoLOGY {+
I gee PROGRESS PROFIT
an ae t de
THIRD ed SCIENCE
t »
INDUSTRY ! INVESTMENT
ty \ t+
URBAN eee TECHNOLOGY RESEARCH
ATTRACTION +? IMPORT "AND
+ DEVELOPMENT
t
OPENING POLICY
Figure 3.The causal duagram of technology and economy
In order to guarantee the steady increase of the. economy in the old
industrial cities, it is necessary to resolve the technology aging problem
at the root, organize the production according to the international
advanced standard, persist in the policy of opening to the outside world,
import the advanced technology and modern management, speed up the
technology reform to the traditional industry, finally the economy and
technology can develop in a coordinated fashion.
SYSTEM MODELING
1. Modeling Purpose
In this paper, we select the S city to be a typical example to construct
an urban system dynamics model. The purpose is to test the results of the
System Dynamics ‘91 Page 679
selected policies and provid the scientific basis for. formulating the
strategies of the economic development in a kind of the old industrial
cities.
2. Model Framework
The model consists of four modules; economy, resource, population and
technology.Its framework is described in Figure 4.-We complete the task of
the modeling and simulation for: above-mentioned model under the help of
the system dynamics modeling support system (-Pei 1999).
EQONCM: MODUL EQONOMIC
OPENING : IC e ;
POLICY RESOURCE. MODULE DEVELOENENT:
OF OLD
INDUSTRY POPULATION MODULE INDUSTRIAL
‘ TECHNOLOGY MODULE CITY
Figure 4. The framework of urban model
3. Simulation Results
There are two experimental projects for urban development on the basis of
the difference of selected policies. First project(No.j) is a basic run
mode, corresponding to the. closed pattern of the old industrial city, its
simulation results are represented in Table 1. Second project (No.2) is a
new run mode, corresponding to the opening pattern of the city, its
simulation results are. represented in Table 2. °
{n comparison with project No.2, project No.1; shows that the economy and
technology of the city will obtain faster growth,it is a result of opening
policy and industry policy for the structure adjustment.
Table 1. Simulatiom results of project No.j
1990 2000 2010
Urban Population 10E5 Person 570 623-7 682-4
Gross National Product 10Eg Yuan 190-8 389-6 879-5
Industrial Output Value 10Eg Yuan 241-1 472.2 1160
Output of Third Industry 10Eg Yuan 70 158-8 357-3
Technology Competence 96 100 166-5 314-4
National Income per Capita Dollars 569 1062 2191
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Table 2.Simulation results of project No.2
1990 2000 2010
Urban Population 19E§ Person 570 611-3 |. 655-7
Gross National Product 19Eg Yuan 190-8 561-4 | 1446
Industrial Output Value 19Eg Yuan 24161 625-4 | 1754
Output of Third Industry 19g Yuan 70 =| 252-6 | 792
Technology Competence % 100 200 438
Natioal Income per Capita Dollars : 569 1561 3748
CONCLUSIONS
The old Industrial cities are a kind of typical complex system, The study
shows that system dynamics can be applied to analyse the economy
development problem of the old urban system. In order to improve the
behavior characteristic of the old urban system, it Is necessary to carry
out the policy of opening to the outside world and adjust the industry
structure, Therefore, adding policy loops in the causal diagram Is
requisite. The non-equilibrium behavior of the opening urban system will
remain to be studied further.
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