Heavy industry priority development strategy and economic growth: The economic logic of the inverted-U theory and economic history explanation

Hongtu Deng, Baoliang Xu, Yan Zhao and Yonghui Xu

Structural Change and Economic Dynamics, 2022, vol. 62, issue C, 1-8

Abstract: Based on the objective fact that new China had a weak industrial base during the planned economy period and the policies implemented, this paper constructs a dynamic optimization model that includes the labor-intensive goods sector, the capital-intensive goods sector, and the final goods sector. The basic conclusion of the theoretical model is that there is an inverted-U relationship between total social output per capita and the share of heavy industry capital stock on the optimal dynamic path of capital accumulation with government intervention, i.e., the relationship is positive until a specific threshold is reached, beyond which it becomes negative. The results of the benchmark regressions and endogeneity tests confirm the inverted-U relationship, although the threshold share of heavy industry capital stock differs among the empirical models.

Keywords: Heavy industry priority development strategy; Economic growth; Inverted-U theory (search for similar items in EconPapers)
JEL-codes: E13 N15 O11 O41 P21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:62:y:2022:i:c:p:1-8

DOI: 10.1016/j.strueco.2022.04.005

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