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Can the Augmented Solow Model Explain China's Economic Growth? A Cross-Country Panel Data Analysis

  • John Knight
  • Sai Ding

China's economy grew at an average annual real growth rate of 9 percent over the last three decades.� Despite the vast empirical literature on testing the neoclassical model of economic growth using data on various groups of countries, very few cross-country regressions include China and none of them particularly focuses on the explanation of China's remarkable economic growth.� We attempt to fill this gap by utilizing panel data on 146 countries over the period 1980-2000 to examine the extent to which the growth difference between China and other countries can be explained by the augmented Solow model.� The estimates are based on system GMM estimation which allows for unobserved country-specific effects, measurement error, and endogeneity problems of regressors.� We find that, in spite of the restrictive assumptions involved, the Solow model augmented by both human capital and structural change provides a fairly good account of international variation in economic growth.� In particular, physical capital investment, changes in the structure of employment, conditional convergence, and population growth are the main sources of the growth difference between China and many other countries.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 380.

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Date of creation: 01 Jan 2008
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Handle: RePEc:oxf:wpaper:380
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