An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Tuesday, June 29, 2021
World Bank: 8.5% GDP growth projected for China in 2021 — China Daily
I know that in internet-time I'm light-years behind this discussion, but Tyler Cowen recently put up a post questioning whether Chinese growth could be explained by Solow catch-up growth, and Noah Smith had a reply that said, "Yes, it could". I just wanted to drop in on that to generally agree with Noah, and to indulge in some quibbles.
Solow catch-up growth (convergence) is just about capital investment. That's the convergence mechanism. And that mechanism says that if you are well below your potential, you'll grow really fast as you accumulate capital rapidly. So the Solow story for China is that there was a profound shift(s) starting in the late 1970's, early 1980's that created a much higher potential level of output. That generates really rapid growth.
Martin Wolf had an article a little while ago. Here's a quote:
The authors also note the distinction between “catch-up” economies, such as China, and frontier economies, such as the US. In the former, growth is more about investing in existing ways of doing things. But frontier economies can only grow by innovating.
re: Solow catch-up growth
ReplyDeleteIs Chinese economic growth Solow catch-up growth?
How China got rich
I know that in internet-time I'm light-years behind this discussion, but Tyler Cowen recently put up a post questioning whether Chinese growth could be explained by Solow catch-up growth, and Noah Smith had a reply that said, "Yes, it could". I just wanted to drop in on that to generally agree with Noah, and to indulge in some quibbles.
Tyler, Noah, and Bob walk into a Chinese bar...
A quote from the above link:
Solow catch-up growth (convergence) is just about capital investment. That's the convergence mechanism. And that mechanism says that if you are well below your potential, you'll grow really fast as you accumulate capital rapidly. So the Solow story for China is that there was a profound shift(s) starting in the late 1970's, early 1980's that created a much higher potential level of output. That generates really rapid growth.
Martin Wolf had an article a little while ago. Here's a quote:
The authors also note the distinction between “catch-up” economies, such as China, and frontier economies, such as the US. In the former, growth is more about investing in existing ways of doing things. But frontier economies can only grow by innovating.
source: How ‘creative destruction’ drives innovation and prosperity
Small numbers grow fast; large ones slow down.
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