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Catch-up Cycle: A General Equilibrium Framework

Author

Listed:
  • Liu Peilin

    (Asian Development Bank Institute)

  • Jia Shen

    (Asian Development Bank Institute)

  • Zhang Xun

    (Asian Development Bank Institute)

Abstract

Certain stylized facts are common among successful economic latecomers: an inverse U-shaped gross domestic product and capital per capita growth rate, high growth rates during the catch-up period, and rapid structural changes. We propose, for the first time, a general equilibrium framework to document the catch-up cycle that a successful latecomer is likely to experience. We argue that technology adoption and imitation, and diminishing marginal returns to capital are the two driving forces of the catch-up cycle. The technological gap and speed/efficiency of technological catching-up are two fundamental factors for successful catching-up. This paper concludes with a case study for the People’s Republic of China and sheds light on the different policy choices at various stages of the catch-up cycle.

Suggested Citation

  • Liu Peilin & Jia Shen & Zhang Xun, 2017. "Catch-up Cycle: A General Equilibrium Framework," ADBI Working Papers 660, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0660
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    References listed on IDEAS

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    1. Zahedi Rad, Vahid & Seifi, Abbas & Fadai, Dawud, 2023. "Policy design for transition from imitation to innovation in emerging photovoltaic sectors using a system dynamics model," Energy Policy, Elsevier, vol. 183(C).

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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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