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Structural Change, Capital’s Contribution, and Economic Efficiency: Sources of China’s Economic Growth Between 1952-1998

  • Wang, Zijian

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Wei, Jiegen


    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

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    This paper examines the effects of structural change, long-term TFP trend and marginal return to capital on China’s economic growth, comparing such effects with those in the other East Asian economies. Our empirical results show that China’s TFP converges to a higher level, and that the marginal return to capital declines dramatically in the late 1990s. Capital contributes much less, while labor contributes more to China’s post-reform growth. China is catching up via technology adoption from the developed economies, and this in turn results in higher TFP growth. Future growth hinges on improving efficiency in the capital allocation system, whose distortions cause the declining marginal return to capital.

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    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 130.

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    Length: 23 pages
    Date of creation: 12 Mar 2004
    Date of revision: 05 Apr 2004
    Handle: RePEc:hhs:gunwpe:0130
    Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
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    1. Bernard, Andrew B & Jones, Charles I, 1996. "Technology and Convergence," Economic Journal, Royal Economic Society, vol. 106(437), pages 1037-44, July.
    2. Jefferson, Gary H. & Rawski, Thomas G. & Zheng, Yuxin, 1996. "Chinese Industrial Productivity: Trends, Measurement Issues, and Recent Developments," Journal of Comparative Economics, Elsevier, vol. 23(2), pages 146-180, October.
    3. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
    4. Jesus Felipe & JSL McCombie, 2002. "Productivity Growth in China Before and After 1978 Revisited," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 5(1), pages 17-43, May.
    5. Jesus Felipe, 1999. "Total factor productivity growth in East Asia: A critical survey," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 1-41.
    6. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
    7. Chow, G.C., 1990. "Capital Formation And Economic Growth In China," Papers 356, Princeton, Department of Economics - Econometric Research Program.
    8. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
    9. Jesus Felipe & J. S. L. McCombie, 2003. "Some methodological problems with the neoclassical analysis of the East Asian miracle," Cambridge Journal of Economics, Oxford University Press, vol. 27(5), pages 695-721, September.
    10. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
    11. 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.
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