Agricultural productivity, structural change, and economic growth in post-reform China

Through review of relevant studies and analysis, this article indicates that the “middle-income trap” is in line with the framework of the mainstream economic growth theories, and, therefore, it is a useful concept through which we can analyze economic growth phenomena in specific economic growth phases. The empirical experiences of many countries also indicate that at specific middle-income stages, economies with high rates of growth tend to encounter economic slowdown or even stagnation. The article shows that China is facing the challenge of determining how to move smoothly beyond the middle-income stage of economic development, while taking into account the shifting population structure, changing resource endowment and growth patterns. The article, drawing on international experiences, puts forward several policy suggestions relating to improvement in total factor productivity, expansion of human capital accumulation and deepening of system and government function reforms.

Is There a “Middle‐income Trap”? Theories, Experiences and Relevance to China

In the 3 years before the 2008 Financial Crisis, GDP growth in sub Saharan Africa (averaged over individual economies) was around 6%, or 2 percentage points above mean growth rates for the preceding 10 years. This period also coincided with significant Chinese FDI flows into these countries, accounting for up to 10% of total inward FDI flows for certain countries in these years. We use growth accounting methods to assess what portion of this elevated growth can be attributed to Chinese inward FDI. We follow Solow (1957), Dennison (1962), and others and use data for individual economies between 1990 and 2008 to calculate Solow residuals for these years for individual economies. We use capital stock data, workforce, and factor share data by country. Capital stock data is unavailable directly, and so we use perpetual inventory methods to construct the data. Factor shares come from UN National Accounts data. We then run counterfactual growth accounting experiments for thirteen Sub-Saharan African countries excluding Chinese FDI inflows for 2005-2007 and also 2003-2009. Our individual results vary by year and country, but there are several year/country combinations where Chinese FDI contributed to an additional one half of a percentage point or above to GDP growth. These results suggest that a significant, even if in some cases small, portion of the elevated growth in sub Saharan Africa in the three years before the Financial Crisis and also in the two years afterwards (2008-2009) can be attributed to Chinese inward investment.

The Contribution of Chinese FDI to Africa's Pre Crisis Growth Surge

Trade statistics portray China as the largest exporter of high-tech products This paper demonstrates that China's leading position in high-tech exports is a myth created by outdated trade statistics, which are inconsistent with trade based on global supply chains Current trade statistics mistakenly credit entire values of assembled high-tech products to China, thus greatly inflating its exports This paper adopted a value-added approach to more accurately measure high-tech exports, revealing that, in 2009, China's valueadded accounted for only about 3 percent of the total value attributed for its exports of iPhones and laptop PCs Furthermore, if assembly is the only source of value-added by Chinese workers, in terms of technological contribution, these assembled high-tech exports are indifferent from labor-intensive products, and so they should be excluded from the high-tech classification

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China's High-Tech Exports: The Myth and Reality

Selection of Value at Risk Models for Energy Commodities

This paper develops a human capital measure in the sense of Schultz (1960) and then reevaluates the contribution of human capital to China's economic growth. The results indicate that human capital plays a much more important role in China's economic growth than available literature suggests, 38.1% of economic growth over 1978-2008, and even higher for 1999-2008. In addition, because human capital formation accelerated following the major educational expansion increases after 1999 (college enrollment in China increased nearly fivefold between 1997 and 2007) while growth rates of GDP are little changed over the period after 1999, total factor productivity increases fall if human capital is used in growth accounting as we suggest. TFP, by our calculations, contributes 16.92% of growth between 1978 and 2008, but this contribution is -7.03% between 1999 and 2008. Negative TFP growth along with the high contribution of physical and human capital to economic growth seem to suggest that there have been decreased in the efficiency of inputs usage in China or worsened misallocation of physical and human capital in recent years. These results underscore the importance of efficient use of human capital, as well as the volume of human capital creation, in China's growth strategy.

The Contribution of Human Capital to China's Economic Growth

This paper uses the Conditional Autoregressive Value at Risk model (CAViaR) proposed by Engle and Manganelli (2004) to evaluate the value-at-risk for daily spot prices of Brent crude oil and West Texas Intermediate crude oil covering the period May 21th, 1987 to Novermber 18th, 2008. Then the accuracy of the estimates of CAViaR model, Normal-GARCH, and GED-GARCH was compared. The results show that all the methods do good job for the low confidence level (95%), and GED-GARCH is the best for spot WTI price, Normal-GARCH and Adaptive-CAViaR are the best for spot Brent price. However, for the high confidence level (99%), Normal-GARCH do a good job for spot WTI, GED-GARCH and four kind of CAViaR specifications do well for spot Brent price. Normal-GARCH does badly for spot Brent price. The result seems suggest that CAViaR do well as well as GED-GARCH since CAViaR directly model the quantile autoregression, but it does not outperform GED-GARCH although it does outperform Normal-GARCH.

Estimation of Value-at-Risk for Energy Commodities via CAViaR Model

The controversy on whether RMB should be appreciated is focused on whether appreciation of exchange rate for RMB may affect China’s economic growth. This study is an empirical test of the relationship between changes in exchange rate and economic growth based on a panel data of eleven developed countries and nine developing countries from 1975 to 2005. The results indicate that in developed countries, appreciation of exchange rate are expansionary as is in consistence with the theory of "contractionary devaluation", whereas in developing countries such appreciation has the effect of contraction. Therefore, the prediction that "appreciation of exchange rate may lead to effects of expansion" according to the theory of "contractionary devaluation" is incorrect in developing countries. It is argued that in developing countries, especially in China where exchange rate is being adjusted, policy-makers should be more prudent when they consider changes in exchange rate.

Exchange Rate and Economic Growth:A Panel Co-integration Analysis

We argue that the demographic changes caused by the one child policy (OCP) may not harm China's long-term growth. This attributes to the higher human capital induced by the intergenerational transfer arrangement under China's poor-functioning formal social security system. Parents raise their children and depend on them for support when they reach an advanced age. The decrease in the number of children prompted by the OCP resulted in parents investing more in their children's educations to ensure retirement consumption. In addition, decreased childcare costs strengthen educational investment through an income effect. Using a calibrated model, a benchmark with the OCP is compared to three counterfactual experiments without the OCP. The output under the OCP is expected to be about 4 percent higher than it would be without the OCP in 2025 under moderate estimates. The output gain comes from a greatly increased educational investment driven by fewer children (11.4 years of schooling rather than 8.1). Our model sheds new light on the prospects of China's long-term growth by emphasizing the OCP's growth enhancing role through human capital formation under the intergenerational transfer arrangement.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Zhao Xiliang

Papers

The Contribution of Human Capital to China's Economic Growth

Estimation of Value-at-Risk for Energy Commodities via CAViaR Model

Exchange Rate and Economic Growth:A Panel Co-integration Analysis

Intergenerational Transfer, Human Capital and Long-Term Growth in China Under the One Child Policy