Modeling Technological Progress and Investment in China: Some Caveats
AbstractSince the early 1990s, the number of papers estimating econometric models and using other quantitative techniques to try to understand different aspects of the Chinese economy has mushroomed. A common feature of some of these studies is the use of neoclassical theory as the underpinning for the empirical implementations. It is often assumed that factor markets are competitive, that firms are profit maximizers, and that these firms respond to the same incentives that firms in market economies do. Many researchers find that the Chinese economy can be well explained using the tools of neoclassical theory. In this paper, we (1) review two examples of estimation of the rate of technical progress, and (2) discuss one attempt at modeling investment. We identify their shortcomings and the problems with the alleged policy implications derived. We show that econometric estimation of neoclassical models may result in apparently sensible results for misinformed reasons. We conclude that modeling the Chinese economy requires a deeper understanding of its inner workings as both a transitional and a developing economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_643.
Date of creation: Dec 2010
Date of revision:
Contact details of provider:
Web page: http://www.levyinstitute.org
China; Identity; Investment; Neoclassical Model; Total Factor Productivity Growth;
Find related papers by JEL classification:
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
- P41 - Economic Systems - - Other Economic Systems - - - Planning, Coordination, and Reform
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chow, G.C., 1990.
"Capital Formation And Economic Growth In China,"
356, Princeton, Department of Economics - Econometric Research Program.
- Felipe, Jesus & Kumar, Utsav & Abdon, Arnelyn & Bacate, Marife, 2012.
"Product complexity and economic development,"
Structural Change and Economic Dynamics,
Elsevier, vol. 23(1), pages 36-68.
- Song, Haiyan & Liu, Zinan & Jiang, Ping, 2001. "Analysing the determinants of China's aggregate investment in the reform period," China Economic Review, Elsevier, vol. 12(2-3), pages 227-242.
- Holz, Carsten A., 2002. "Long live China's state-owned enterprises: deflating the myth of poor financial performance," Journal of Asian Economics, Elsevier, vol. 13(4), pages 493-529.
- Felipe, Jesus & McCombie, J. S. L., 1999. "Wan's "New Approach" to Technical Change: A Comment," Journal of Comparative Economics, Elsevier, vol. 27(2), pages 355-363, June.
- Wan, Guang H., 1995. "Technical Change in Chinese State Industry: A New Approach," Journal of Comparative Economics, Elsevier, vol. 21(3), pages 308-325, December.
- Sun, Laixiang, 1998. "Estimating Investment Functions Based on Cointegration: The Case of China," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 175-191, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards).
If references are entirely missing, you can add them using this form.