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Testing the Neoclassical Theory of Economic Growth: Evidence from Chinese Provinces

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  • Hong Li
  • Zinan Liu

    ()

  • Ivonia Rebelo
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    Abstract

    There has been renewed empirical work recently on testing the neoclassical model of economic growth using data on various groups of countries. But none of the cross-country regressions includes China, the largest developing economy in the world. This study utilises both cross-sectional and panel data on provinces of China over the reform period 1978–1995 to examine the extent to which the growth process in this country can be explained by the augmented Solow-Swan model. We found that in spite of restrictive assumptions used, the model provides a fairly good description of cross-sectional data. The levels and growth rates of GDP per capita are shown to be higher in regional economies with lower population growth, greater openness to foreign countries and more investment in physical and human capital. In addition, regional economies are shown to converge both conditionally and unconditionally over the reform period. However, the quantitative implications of the augmented Solow-Swan model are not borne out in panel data. Copyright Kluwer Academic Publishers 1998

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    File URL: http://hdl.handle.net/10.1023/A:1003571107706
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    Bibliographic Info

    Article provided by Springer in its journal Economics of Planning.

    Volume (Year): 31 (1998)
    Issue (Month): 2 (May)
    Pages: 117-132

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    Handle: RePEc:kap:ecopln:v:31:y:1998:i:2:p:117-132

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    Web page: http://www.springerlink.com/link.asp?id=113294

    Related research

    Keywords: economic growth; neo-classical model; China;

    References

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    1. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
    2. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    3. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
    4. Malcolm Knight & Norman Loayza & Delano Villanueva, 1993. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 512-541, September.
    5. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    6. Shang-Jin Wei, 1993. "Open door policy and China's rapid growth: evidence from city-level data," Pacific Basin Working Paper Series 93-09, Federal Reserve Bank of San Francisco.
    7. Quah, Danny, 1993. " Galton's Fallacy and Tests of the Convergence Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 427-43, December.
    8. Jian, Tianlun & Sachs, Jeffrey D. & Warner, Andrew M., 1996. "Trends in regional inequality in China," China Economic Review, Elsevier, vol. 7(1), pages 1-21.
    9. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    10. Chen, Jian & Fleisher, Belton M., 1996. "Regional Income Inequality and Economic Growth in China," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 141-164, April.
    11. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    12. Tianlun Jian & Jeffrey D. Sachs & Andrew M. Warner, 1996. "Trends in Regional Inequality in China," NBER Working Papers 5412, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Maasoumi, Esfandiar & Wang, Le, 2006. "Economic Reform, Growth and Convergence in China," Departmental Working Papers 0602, Southern Methodist University, Department of Economics.
    2. Bulent Unel & Harm Zebregs, 2006. "The Dynamics of Provincial Growth in China," IMF Working Papers 06/55, International Monetary Fund.
    3. Sai Ding & John Knight, 2008. "Why has China Grown So Fast? The Role of Physical and Human Capital Formation," Economics Series Working Papers 414, University of Oxford, Department of Economics.
    4. Derek C. Jones & Cheng Li & Ann L. Owen*, 2003. "Growth and Regional Inequality in China During the Reform Era," William Davidson Institute Working Papers Series 2003-561, William Davidson Institute at the University of Michigan.
    5. Jahangir Aziz & Christoph Duenwald, 2001. "China's Provincial Growth Dynamics," Development and Comp Systems 0012004, EconWPA.
    6. Ding, Sai & Knight, John, 2009. "Why has China Grown so Fast? The Role of Structural Change," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 7, Verein für Socialpolitik, Research Committee Development Economics.
    7. Sylvie DEMURGER & SACHS & Wing Thye WOO & BAO & CHANG & MELLINGER, 2001. "Geography, Economic Policy and Regional Development in China," Working Papers 200109, CERDI.
    8. Jahangir Aziz & Christoph Duenwald, 2001. "China's Provincial Growth Dynamics," IMF Working Papers 01/3, International Monetary Fund.
    9. Françoise Lemoine & Grégoire Mayo & Sandra Poncet & Deniz Ünal, 2014. "The Geographic Pattern of China's Growth and Convergence within Industry," Working Papers 2014-04, CEPII research center.
    10. DOBSON, Steve & RAMLOGAN, Carlyn & STROBL, Eric, 2003. "Why do rates of convergence differ ? A meta-regression analysis," CORE Discussion Papers 2003020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Gholami, Roghieh & Lee, Sang-Yong Tom & Heshmati, Almas, 2005. "The Causal Relationship between ICT and FDI," Working Paper Series RP2005/26, World Institute for Development Economic Research (UNU-WIDER).
    12. Marwah, Kanta & Tavakoli, Akbar, 2004. "The effect of foreign capital and imports on economic growth: further evidence from four Asian countries (1970-1998)," Journal of Asian Economics, Elsevier, vol. 15(2), pages 399-413, April.

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