Technical change and funds for science and technology

In this paper, first a new model, the G‐C‐D model, which is used to measure the technological advance, is built. The progress with non‐technical elements in Solow's “remaining value” is removed by using the idea, method and modeling technique of grey system theory. So the difficult technical problem in measurement of technological advance has been solved to a certain extent. Secondly, another new model, the G‐E model, which combines the Grey model with the econometrics model, is built. Using the principle of grey incidence to analyse and cluster system factors, adopting the GM(1,1) simulated values of system's variables to build the econometrics model and confirming the predicted values with grey models, some difficult techniques in econometrics model building have been solved. Thirdly, the periodic G‐C‐D model of Henan Province is built in four different periods and the contribution rate of the periodic technological advance of Henan Province is measured. Lastly, the technical change and the relation between the technical change and the funds for science and technology of Henan Province are analysed with the grey production function (the G‐C‐D) and the grey‐econometrics combined model (the G‐E), and some useful outcome for policy‐making body are obtained.