Culture and Economic Development in Late Comers: Comparing China and India

Thomas Barbiero () and Haiwen Zhou
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Thomas Barbiero: Department of Economics, Toronto Metropolitan University, Toronto, Canada

No 86, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: China and India are both late comers to industrialization. Both adopted similar economic development strategies after World War II, but the per capita GDP diverged significantly in the last 40 years. While economic growth and development have many components, we explain the difference in economic performance by emphasizing the difference in state capacity in the two economies. A country’s state capacity is affected by culture and history. China established a unified language and culture two thousand years ago that enabled it to develop strong state capacity. With a strong state capacity, China made crucial investments in infrastructure and in key heavy industries and developed technological capabilities to help start and sustain growth. India, on the other hand, is a country segmented by religion, caste, and language which has hindered the development of effective state capacity, and thus complementary state investments to spur economic growth. Moreover, India has up to now relied more heavily on expansion of its service sector compared to China, which has hindered its exports, a crucial element that helped China’s economy. India’s future industrialization crucially depends on national integration and concomitant strengthening of state capacity.

Keywords: Economic development; state capacity; technological capabilities; political economy; economy of China (search for similar items in EconPapers)
JEL-codes: O10 O53 O57 P52 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2024-01
New Economics Papers: this item is included in nep-cna, nep-gro and nep-his
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