IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v56y2019ic1.html
   My bibliography  Save this article

Hitting the Great Wall: Structural change and China's growth slowdown

Author

Listed:
  • Ye, Longfeng
  • Robertson, Peter E.

Abstract

China is facing slowing growth rates, slowing rates of rural to urban migration and resistance to reforms that would liberalize internal migration restrictions (Hukou). We use a two sector Ramsey growth model and show that, allowing for endogenous capital accumulation, labour reallocation has accounted for approximately one fifth of China's per capita GDP growth over the last 30 years, and that Hukou reform could generate a significant boost to China's per capita GDP growth over the next decade. Our results contrast with conclusions drawn from the traditional growth accounting literature on labour reallocation effects in China because our simulation method allows for endogenous capital accumulation dynamics.

Suggested Citation

  • Ye, Longfeng & Robertson, Peter E., 2019. "Hitting the Great Wall: Structural change and China's growth slowdown," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    • Handle: RePEc:eee:chieco:v:56:y:2019:i:c:1
    DOI: 10.1016/j.chieco.2019.101302
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X19300550
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2019.101302?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Berthold Herrendorf & Christopher Herrington & Ákos Valentinyi, 2015. "Sectoral Technology and Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 104-133, October.
    2. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    3. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2013. "Factor Market Distortions Across Time, Space, and Sectors in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 39-58, January.
    4. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
    5. Weil, Philippe, 1989. "The equity premium puzzle and the risk-free rate puzzle," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 401-421, November.
    6. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
    7. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    8. Au, Chun-Chung & Henderson, J. Vernon, 2006. "How migration restrictions limit agglomeration and productivity in China," Journal of Development Economics, Elsevier, vol. 80(2), pages 350-388, August.
    9. Alvarez-Cuadrado, Francisco & Long, Ngo & Poschke, Markus, 2017. "Capital-labor substitution, structural change and growth," Theoretical Economics, Econometric Society, vol. 12(3), September.
    10. Barro, Robert J, 1999. "Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-137, June.
    11. Xiaodong Zhu, 2012. "Understanding China's Growth: Past, Present, and Future," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 103-124, Fall.
    12. Xin Meng, 2012. "Labor Market Outcomes and Reforms in China," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 75-102, Fall.
    13. Li Zhang & Li Tao, 2012. "Barriers to the Acquisition of Urban Hukou in Chinese Cities," Environment and Planning A, , vol. 44(12), pages 2883-2900, December.
    14. Trimborn, Timo & Koch, Karl-Josef & Steger, Thomas M., 2008. "Multidimensional Transitional Dynamics: A Simple Numerical Procedure," Macroeconomic Dynamics, Cambridge University Press, vol. 12(3), pages 301-319, June.
    15. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    16. Trevor Tombe & Xiaodong Zhu, 2019. "Trade, Migration, and Productivity: A Quantitative Analysis of China," American Economic Review, American Economic Association, vol. 109(5), pages 1843-1872, May.
    17. Dekle, Robert & Vandenbroucke, Guillaume, 2012. "A quantitative analysis of China's structural transformation," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 119-135.
    18. Esteban-Pretel, Julen & Sawada, Yasuyuki, 2014. "On the role of policy interventions in structural change and economic development: The case of postwar Japan," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 67-83.
    19. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    20. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    21. Dani Rodrik, 2010. "Making Room for China in the World Economy," American Economic Review, American Economic Association, vol. 100(2), pages 89-93, May.
    22. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    23. Bloom, David E. & Canning, David & Hu, Linlin & Liu, Yuanli & Mahal, Ajay & Yip, Winnie, 2010. "The contribution of population health and demographic change to economic growth in China and India," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 17-33, March.
    24. Tasso Adamopoulos & Loren Brandt & Jessica Leight & Diego Restuccia, 2022. "Misallocation, Selection, and Productivity: A Quantitative Analysis With Panel Data From China," Econometrica, Econometric Society, vol. 90(3), pages 1261-1282, May.
    25. Whalley, John & Zhang, Shunming, 2007. "A numerical simulation analysis of (Hukou) labour mobility restrictions in China," Journal of Development Economics, Elsevier, vol. 83(2), pages 392-410, July.
    26. Robertson, Peter E, 1999. "Economic Growth and the Return to Capital in Developing Economies," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 577-594, October.
    27. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    28. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 61-102.
    29. Behrman, Jere R, 1972. "Sectoral Elasticities of Substitution between Capital and Labor in a Developing Economy: Time Series Analysis in the Case of Postwar Chile," Econometrica, Econometric Society, vol. 40(2), pages 311-326, March.
    30. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-452, May.
    31. Meng, Xin & Zhang, Junsen, 2001. "The Two-Tier Labor Market in Urban China: Occupational Segregation and Wage Differentials between Urban Residents and Rural Migrants in Shanghai," Journal of Comparative Economics, Elsevier, vol. 29(3), pages 485-504, September.
    32. Kathleen Beegle & Joachim De Weerdt & Stefan Dercon, 2011. "Migration and Economic Mobility in Tanzania: Evidence from a Tracking Survey," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 1010-1033, August.
    33. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
    34. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    35. repec:oup:qjecon:v:129:y:2014:i:2:p:939-993. is not listed on IDEAS
    36. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
    37. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 5266, London School of Economics and Political Science, LSE Library.
    38. John S. Landon-Lane & Peter E. Robertson, 2007. "Reassessing The Impact Of Barriers To Capital Accumulation On International Income Differences," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 147-154, February.
    39. 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, Oxford University Press, vol. 114(1), pages 83-116.
    40. Knight, John & Song, Lina, 1999. "Employment Constraints and Sub-optimality in Chinese Enterprises," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 284-299, April.
    41. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    42. Cai, Fang & Wang, Meiyan, 2010. "Growth and structural changes in employment in transition China," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 71-81, March.
    43. Chang-Tai Hsieh & Peter J. Klenow, 2010. "Development Accounting," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 207-223, January.
    44. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    45. Bosker, Maarten & Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2012. "Relaxing Hukou: Increased labor mobility and China’s economic geography," Journal of Urban Economics, Elsevier, vol. 72(2), pages 252-266.
    46. Yang Yao, 2011. "The Relationship between China's Export-led Growth and Its Double Transition of Demographic Change and Industrialization-super-∗," Asian Economic Papers, MIT Press, vol. 10(2), pages 52-76, Summer.
    47. Yiping Huang & Tingsong Jiang, 2010. "What does the Lewis turning point mean for China? A computable general equilibrium analysis," China Economic Journal, Taylor & Francis Journals, vol. 3(2), pages 191-207.
    48. Chun-Chung Au & J. Vernon Henderson, 2006. "Are Chinese Cities Too Small?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 549-576.
    49. Yinhua Mai & Xiujian Peng & Peter Dixon & Maureen Rimmer, 2014. "The economic effects of facilitating the flow of rural workers to urban employment in China," Papers in Regional Science, Wiley Blackwell, vol. 93(3), pages 619-642, August.
    50. Hongbin Li & Lei Li & Binzhen Wu & Yanyan Xiong, 2012. "The End of Cheap Chinese Labor," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 57-74, Fall.
    51. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    52. Brian McCaig & Nina Pavcnik, 2013. "Moving out of Agriculture: Structural Change in Vietnam," NBER Working Papers 19616, National Bureau of Economic Research, Inc.
    53. Song, Yang, 2014. "What should economists know about the current Chinese hukou system?," China Economic Review, Elsevier, vol. 29(C), pages 200-212.
    54. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
    55. Douglas Gollin & David Lagakos & Michael E. Waugh, 2014. "The Agricultural Productivity Gap," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 939-993.
    56. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
    57. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
    58. Longfeng Ye & Peter E. Robertson, 2018. "How Important was Labor Reallocation for China's Growth? A Skeptical Assessment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(4), pages 828-852, December.
    59. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 641-680.
    60. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-980, April.
    61. Sebastian Edwards, 1989. "Openness, Outward Orientation, Trade Liberalization and Economic Performance in Developing Countries," NBER Working Papers 2908, National Bureau of Economic Research, Inc.
    62. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
    63. Jing Cao & Mun S. Ho & Dale W. Jorgenson & Ruoen Ren & Linlin Sun & Ximing Yue, 2009. "Industrial And Aggregate Measures Of Productivity Growth In China, 1982–2000," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(s1), pages 485-513, July.
    64. John S. Landon‐Lane & Peter E. Robertson, 2009. "Factor Accumulation And Growth Miracles In A Two‐Sector Neoclassical Growth Model," Manchester School, University of Manchester, vol. 77(2), pages 153-170, March.
    65. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
    66. 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.
    67. Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers.
    68. CAI, Fang & DU, Yang, 2011. "Wage increases, wage convergence, and the Lewis turning point in China," China Economic Review, Elsevier, vol. 22(4), pages 601-610.
    69. Li, Haizheng & Liu, Qinyi & Li, Bo & Fraumeni, Barbara & Zhang, Xiaobei, 2014. "Human capital estimates in China: New panel data 1985–2010," China Economic Review, Elsevier, vol. 30(C), pages 397-418.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Petar Sorić, 2020. "“Normal†growth of the Chinese economy: new metrics based on consumer confidence data," Economics Bulletin, AccessEcon, vol. 40(2), pages 1740-1746.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Longfeng Ye & Peter E. Robertson, 2017. "Migration and Growth in China: A Sceptical Assessment of the Evidence," Economics Discussion / Working Papers 17-03, The University of Western Australia, Department of Economics.
    2. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    3. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    4. Barker, Tom & Üngör, Murat, 2019. "Vietnam: The next asian Tiger?," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 96-118.
    5. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    6. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.
    7. Blanco, Cesar & Raurich, Xavier, 2022. "Agricultural composition and labor productivity," Journal of Development Economics, Elsevier, vol. 158(C).
    8. L Rachel Ngai & Christopher A Pissarides & Jin Wang, 2019. "China’s Mobility Barriers and Employment Allocations," Journal of the European Economic Association, European Economic Association, vol. 17(5), pages 1617-1653.
    9. Berthold Herrendorf & Todd Schoellman, 2018. "Wages, Human Capital, and Barriers to Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 1-23, April.
    10. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Journal of Economic Growth, Springer, vol. 11(3), pages 187-228, September.
    11. Huikang Ying, 2014. "Growth and Structural Change in a Dynamic Lagakos-Waugh Model," Bristol Economics Discussion Papers 14/639, School of Economics, University of Bristol, UK.
    12. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    13. Fabio Monteforte, 2015. "Structural Transformation, the Push-Pull Hypothesis and the Labour Market," Bristol Economics Discussion Papers 15/654, School of Economics, University of Bristol, UK, revised 01 Dec 2017.
    14. Liao, Junmin, 2020. "The rise of the service sector in China," China Economic Review, Elsevier, vol. 59(C).
    15. Wingender, Asger Moll, 2015. "Skill complementarity and the dual economy," European Economic Review, Elsevier, vol. 74(C), pages 269-285.
    16. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
    17. Samuel Marden, 2016. "The agricultural roots of industrial development: ‘forward linkages’ in reform era China," Working Paper Series 09116, Department of Economics, University of Sussex Business School.
    18. Samuel Marden, 2016. "The agricultural roots of industrial development: ‘forward linkages’ in reform era China," Working Paper Series 9116, Department of Economics, University of Sussex.
    19. Xi Li & Xuewen Liu & Yong Wang, 2015. "A Model of China's State Capitalism," HKUST IEMS Working Paper Series 2015-12, HKUST Institute for Emerging Market Studies, revised Feb 2015.
    20. Monteforte, Fabio, 2020. "Structural change, the push-pull hypothesis and the Spanish labour market," Economic Modelling, Elsevier, vol. 86(C), pages 148-169.

    More about this item

    Keywords

    Economic growth; Structural change; Dual economy; Capital accumulation; China;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:56:y:2019:i:c:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.