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The Return to Capital in China

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Author Info

  • Chong-En Bai

    (Tsinghua University)

  • Chang-Tai Hsieh

    (University of California, Berkeley)

  • Yingyi Qian

    (University of California, Berkeley)

Abstract

China’s investment rate is one of the highest in the world, a fact that leads one to suspect that the return to capital in China must be quite low. Using data from China’s national accounts, this paper estimates the return to capital in China. We find that the aggregate annual return to capital averaged 25 percent during 1978-93, fell during 1993-98, and has remained roughly stable at around 20 percent since 1998. Thus the aggregate return to capital does not appear to be significantly lower in China than in the rest of the world. We also find that the dispersion in the return to capital across Chinese provinces has fallen since 1978.

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Bibliographic Info

Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 37 (2006)
Issue (Month): 2 ()
Pages: 61-102

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Handle: RePEc:bin:bpeajo:v:37:y:2006:i:2006-2:p:61-102

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Keywords: macroeconomics; China; Capital; Chinese; China investment rate;

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References

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  1. Wang Xiaolu & Meng Lian, 2001. "A reevaluation of China's economic growth," China Economic Review, Elsevier, vol. 12(4), pages 338-346.
  2. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  3. Chow, Gregory C, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 809-42, August.
  4. Perkins, Dwight Heald, 1988. "Reforming China's Economic System," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 601-45, June.
  5. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  6. Mohsin S. Khan & Zuliu Hu, 1996. "Why is China Growing So Fast?," IMF Working Papers 96/75, International Monetary Fund.
  7. Genevieve Boyreau-Debray & Shang-Jin Wei, 2005. "Pitfalls of a State-Dominated Financial System: The Case of China," NBER Working Papers 11214, National Bureau of Economic Research, Inc.
  8. Kui-Wai Li, 2003. "China's Capital and Productivity Measurement Using Financial Resources," Working Papers 851, Economic Growth Center, Yale University.
  9. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  10. Carsten A Holz, 2005. "New Capital Estimates for China," Macroeconomics 0512001, EconWPA.
  11. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  12. Francesco Caselli & James Feyrer, 2006. "The marginal product of capital," LSE Research Online Documents on Economics 3560, London School of Economics and Political Science, LSE Library.
  13. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
  14. Zhang, Xiaobo & Tan, Kong-Yam, 2004. "Blunt to sharpened razor," DSGD discussion papers 13, International Food Policy Research Institute (IFPRI).
  15. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
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