IDEAS home Printed from https://ideas.repec.org/a/oup/jeurec/v15y2017i5p943-988..html
   My bibliography  Save this article

Growing and Slowing Down Like China

Author

Listed:
  • Fabrizio Zilibotti

Abstract

This article is based on the presidential address delivered at the EEA Annual Congress 2016. It discusses China's institutional and economic transformation through the lens of the model of growth and convergence developed in Acemoglu, Aghion, and Zilibotti (JEEA 2006), which emphasizes the dichotomy between investment- and innovation-led growth. The economic reforms introduced in the 1980s and 1990s have enabled the Chinese economy to grow at historically unprecedented rates through fostering investment, reallocation, and technology adoption from abroad. The Chinese stimulus package introduced in 2008 appears to have prolonged the longevity of China's investment-driven growth beyond its optimal point. Over the last decade, China has activated the engine of innovation-led growth. The article discusses the virtues and limits of such ongoing transition, based on research in progress using firm-level data on R&D and productivity growth. Finally, it provides an appraisal of the institutional and policy reforms that are necessary for China to continue on its path of rapid convergence.

Suggested Citation

  • Fabrizio Zilibotti, 2017. "Growing and Slowing Down Like China," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 943-988.
    • Handle: RePEc:oup:jeurec:v:15:y:2017:i:5:p:943-988.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jeea/jvx018
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    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. Barry Eichengreen & Donghyun Park & Kwanho Shin, 2012. "When Fast-Growing Economies Slow Down: International Evidence and Implications for China," Asian Economic Papers, MIT Press, vol. 11(1), pages 42-87, Winter/Sp.
    2. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    3. , & Lorenz, Jan & ,, 2016. "Innovation vs. imitation and the evolution of productivity distributions," Theoretical Economics, Econometric Society, vol. 11(3), September.
    4. Aiyar, Shekhar & Duval, Romain & Puy, Damien & Wu, Yiqun & Zhang, Longmei, 2018. "Growth slowdowns and the middle-income trap," Japan and the World Economy, Elsevier, vol. 48(C), pages 22-37.
    5. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 1-37.
    6. 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.
    7. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1001-1026.
    8. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    9. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 295-366.
    10. Banerjee, Abhijit & Qian, Nancy & Meng, Xin & Porzio, Tommaso, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," CEPR Discussion Papers 9935, C.E.P.R. Discussion Papers.
    11. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    12. Criscuolo, Chiara & Martin, Ralf & Overman, Henry & Van Reenen, John, 2012. "The Causal Effects of an Industrial Policy," IZA Discussion Papers 6323, Institute of Labor Economics (IZA).
    13. Mark Rosenzweig & Junsen Zhang, 2014. "Co-residence, Life-Cycle Savings and Inter- Generational Support in Urban China," Working Papers 1039, Economic Growth Center, Yale University.
    14. Zheng Song & Kjetil Storesletten & Yikai Wang & Fabrizio Zilibotti, 2015. "Sharing High Growth across Generations: Pensions and Demographic Transition in China," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 1-39, April.
    15. Yong Wang & Xuewen Liu & Xi Li, 2013. "A Model of China's State Capitalism," 2013 Meeting Papers 853, Society for Economic Dynamics.
    16. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016064.
    17. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    18. Yikai Wang, 2014. "Will China Escape the Middle-income Trap? A Politico-economic Theory of Growth and State Capitalism," 2014 Meeting Papers 202, Society for Economic Dynamics.
    19. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 295-366.
    20. Treb Allen & Costas Arkolakis, 2014. "Trade and the Topography of the Spatial Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1085-1140.
    21. Timo Boppart, 2014. "Structural Change and the Kaldor Facts in a Growth Model With Relative Price Effects and Non‐Gorman Preferences," Econometrica, Econometric Society, vol. 82, pages 2167-2196, November.
    22. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 563-606.
    23. Thomas J. Holmes & Ellen R. McGrattan & Edward C. Prescott, 2015. "Quid Pro Quo: Technology Capital Transfers for Market Access in China," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 1154-1193.
    24. Horag Choi & Steven Lugauer & Nelson C. Mark, 2017. "Precautionary Saving of Chinese and U.S. Households," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(4), pages 635-661, June.
    25. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
    26. Barro, Robert J & Sala-i-Martin, Xavier, 1997. "Technological Diffusion, Convergence, and Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 1-26, March.
    27. Acemoglu, Daron & Gancia, Gino & Zilibotti, Fabrizio, 2012. "Competing engines of growth: Innovation and standardization," Journal of Economic Theory, Elsevier, vol. 147(2), pages 570-601.3.
    28. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107638105.
    29. 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.
    30. Tao Yang, Dennis, 2004. "Education and allocative efficiency: household income growth during rural reforms in China," Journal of Development Economics, Elsevier, vol. 74(1), pages 137-162, June.
    31. Chiara Criscuolo & Ralf Martin & Henry G. Overman & John Van Reenen, 2019. "Some Causal Effects of an Industrial Policy," American Economic Review, American Economic Association, vol. 109(1), pages 48-85, January.
    32. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    33. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
    34. Givord, Pauline & Rathelot, Roland & Sillard, Patrick, 2013. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 151-163.
    35. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016057.
    36. Eric Maskin & Yingyi Qian & Chenggang Xu, 2000. "Incentives, Information, and Organizational Form," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 359-378.
    37. Jérôme Vandenbussche & Philippe Aghion & Costas Meghir, 2006. "Growth, distance to frontier and composition of human capital," Journal of Economic Growth, Springer, vol. 11(2), pages 97-127, June.
    38. McMillan, John & Whalley, John & Zhu, Lijing, 1989. "The Impact of China's Economic Reforms on Agricultural Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 781-807, August.
    39. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107674165.
    40. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 57-84.
    41. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 1049-1090.
    42. Ma, Lin & Tang, Yang, 2020. "Geography, trade, and internal migration in China," Journal of Urban Economics, Elsevier, vol. 115(C).
    43. 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.
    44. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
    45. Li, Hongbin & Zhou, Li-An, 2005. "Political turnover and economic performance: the incentive role of personnel control in China," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1743-1762, September.
    46. Ruixue Jia & Masayuki Kudamatsu & David Seim, 2015. "Political Selection In China: The Complementary Roles Of Connections And Performance," Journal of the European Economic Association, European Economic Association, vol. 13(4), pages 631-668, August.
    47. Xin Meng & Nancy Qian & Pierre Yared, 2015. "The Institutional Causes of China's Great Famine, 1959–1961," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(4), pages 1568-1611.
    48. Mr. Steven V Dunaway & Mr. Vivek B. Arora, 2007. "Pension Reform in China: The Need for a New Approach," IMF Working Papers 2007/109, International Monetary Fund.
    49. Ronald Coase & Ning Wang, 2012. "China in Transition," Palgrave Macmillan Books, in: How China Became Capitalist, chapter 2, pages 22-40, Palgrave Macmillan.
    50. Wyatt J. Brooks & Joseph P. Kaboski & Yao Amber Li, 2016. "Growth Policy, Agglomeration, and (the Lack of) Competition," NBER Working Papers 22947, National Bureau of Economic Research, Inc.
    51. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    52. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    53. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    54. Wei Li & Dennis Tao Yang, 2005. "The Great Leap Forward: Anatomy of a Central Planning Disaster," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 840-877, August.
    55. Barry Eichengreen & Donghyun Park & Kwanho Shin, 2013. "Growth Slowdowns Redux: New Evidence on the Middle-Income Trap," NBER Working Papers 18673, National Bureau of Economic Research, Inc.
    56. Kjetil Storesletten & Fabrizio Zilibotti, 2014. "China’s Great Convergence and Beyond," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 333-362, August.
    57. Unknown, 2005. "Forward," 2005 Conference: Slovenia in the EU - Challenges for Agriculture, Food Science and Rural Affairs, November 10-11, 2005, Moravske Toplice, Slovenia 183804, Slovenian Association of Agricultural Economists (DAES).
    58. Beerli, Andreas & Weiss, Franziska J. & Zilibotti, Fabrizio & Zweimüller, Josef, 2020. "Demand forces of technical change evidence from the Chinese manufacturing industry," China Economic Review, Elsevier, vol. 60(C).
    59. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107627314.
    60. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016040.
    61. Christine Wong, 2011. "The Fiscal Stimulus Programme and Public Governance Issues in China," OECD Journal on Budgeting, OECD Publishing, vol. 11(3), pages 1-22.
    62. Shih, Victor & Adolph, Christopher & Liu, Mingxing, 2012. "Getting Ahead in the Communist Party: Explaining the Advancement of Central Committee Members in China," American Political Science Review, Cambridge University Press, vol. 106(1), pages 166-187, February.
    63. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
    64. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," NBER Working Papers 21006, National Bureau of Economic Research, Inc.
    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. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    67. Jiahua Che & Yingyi Qian, 1998. "Insecure Property Rights and Government Ownership of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 467-496.
    68. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    Full references (including those not matched with items on IDEAS)

    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. Beerli, Andreas & Weiss, Franziska J. & Zilibotti, Fabrizio & Zweimüller, Josef, 2020. "Demand forces of technical change evidence from the Chinese manufacturing industry," China Economic Review, Elsevier, vol. 60(C).
    2. Jerzmanowski, Michal & Tamura, Robert, 2019. "Directed technological change & cross-country income differences: A quantitative analysis," Journal of Development Economics, Elsevier, vol. 141(C).
    3. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    4. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    5. Philippe Aghion & Peter Howitt & Susanne Prantl, 2015. "Patent rights, product market reforms, and innovation," Journal of Economic Growth, Springer, vol. 20(3), pages 223-262, September.
    6. Kjetil Storesletten & Bo Zhao & Fabrizio Zilibotti, 2019. "Business Cycle during Structural Change: Arthur Lewis' Theory from a Neoclassical Perspective," Cowles Foundation Discussion Papers 2191, Cowles Foundation for Research in Economics, Yale University.
    7. Sai Ding & Puyang Sun & Wei Jiang, 2019. "The Effect of Foreign Entry Regulation on Downstream Productivity: Microeconomic Evidence from China," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 925-959, July.
    8. Alessandra Bonfiglioli & Rosario Crinò & Gino Gancia, 2018. "Firms and Economic Performance: A view from Trade," Working Papers 1034, Barcelona School of Economics.
    9. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    10. Bessonova, Evguenia & Gonchar, Ksenia, 2019. "How the innovation-competition link is shaped by technology distance in a high-barrier catch-up economy," Technovation, Elsevier, vol. 86, pages 15-32.
    11. Wei Xiong, 2018. "The Mandarin Model of Growth," NBER Working Papers 25296, National Bureau of Economic Research, Inc.
    12. Fang, Hanming & Hou, Linke & Liu, Mingxing & Xu, Lixin Colin & Zhang, Pengfei, 2023. "Political survival, local accountability, and long-term development: Evidence from an authoritarian country," Journal of Comparative Economics, Elsevier, vol. 51(1), pages 15-40.
    13. Ufuk Akcigit & Murat Alp Celik & Jeremy Greenwood, 2016. "Buy, Keep, or Sell: Economic Growth and the Market for Ideas," Econometrica, Econometric Society, vol. 84, pages 943-984, May.
    14. Gino Gancia, 2012. "Globalization, technology and inequality," Economics Working Papers 1363, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2012.
    15. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Growth, development, and structural change at the firm-level: The example of the PR China," Papers 2012.14503, arXiv.org.
    16. Stephen J. Redding, 2020. "Trade and Geography," NBER Working Papers 27821, National Bureau of Economic Research, Inc.
    17. Hansen, G.D. & Ohanian, L.E., 2016. "Neoclassical Models in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2043-2130, Elsevier.
    18. Laiqun Jin & Changwei Mo & Bochao Zhang & Bing Yu, 2018. "What Is the Focus of Structural Reform in China?—Comparison of the Factor Misallocation Degree within the Manufacturing Industry with a Unified Model," Sustainability, MDPI, vol. 10(11), pages 1-19, November.
    19. Zheng Liu & Pengfei Wang & Zhiwei Xu, 2021. "Interest Rate Liberalization and Capital Misallocations," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(2), pages 373-419, April.
    20. Elisa Gamberoni & Claire Giordano & Paloma Lopez-Garcia, 2016. "Capital and labour (mis)allocation in the euro area: Some stylized facts and determinants," Questioni di Economia e Finanza (Occasional Papers) 349, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    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:oup:jeurec:v:15:y:2017:i:5:p:943-988.. 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/jeea .

    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.