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Type | Journal Article |
Scope | Discipline-based scholarship |
Title | Growing like China |
Organization Unit | |
Authors |
|
Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
|
Journal Title | American Economic Review |
Publisher | American Economic Association |
Geographical Reach | international |
ISSN | 0002-8282 |
Volume | 101 |
Number | 1 |
Page Range | 196 - 233 |
Date | 2011 |
Abstract Text | This paper constructs a growth model that is consistent with salient features of the recent Chinese growth experience: high output growth, sustained returns on capital investment, extensive reallocation within the manufacturing sector, falling labor share and accumulation of a large foreign surplus. The building blocks of the theory are asymmetric financial imperfections and heterogeneous productivity. Some firms use more productive technologies, but low-productivity firms survive because of better access to credit markets. Due to the financial imperfections, high-productivity firms — which are run by entrepreneurs — must be financed out of internal savings. If these savings are sufficiently large, the high-productivity firms outgrow the low-productivity firms and attract an increasing employment share. The downsizing of the financially integrated firms forces a growing share of domestic savings to be invested in foreign assets, generating a foreign surplus. A calibrated version of the theory can account quantitatively for China’s growth experience during 1992-2007. |
Digital Object Identifier | 10.1257/aer.101.1.196 |
PDF File | Download from ZORA |
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