Chinese Economic Growth: Sources and Prospects

Michael Magill, Wing Thye Woo and Julian R. Betts
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Julian R. Betts: Department of Economics, University of California Davis

No 173, Working Papers from University of California, Davis, Department of Economics

Abstract: China's impressive growth is rooted in the liberalization of a surplus labor economy that has a high saving rate. The reallocation of surplus agriculture labor to industry and service sectors generates a growth effect that shows up in total factor productivity (TFP) growth. Net TFP, the resulting residual, contains the true measure of technological progress (among other effects). Taking account of mismeasurement problems, especially of value added in the industry sector, I calculated a plausible range of estimates for each source of growth. My point estimates for each of their contribution to the average annual 9.3 percent growth rate in the 1979-93 period growth rate in the 1985-93 subperiod are, respectively: 1979-93 1985-93 4.9 5.5 percentage points from capital accumulation 1.3 1.1 percentage points from labor force expansion. 1.1 1.3 percentage points from reallocation of labor from agriculture 0.2 0.3 percentage points from inconsistent use of base prices, 0.5Ã?0.7 0.9Ã?1.2 percentage points from overstatement of industrial growth, 1.1-1.3 0.3Ã?0.6 percentage points from net TFP growth.

Date: 2003-01-07
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