Growing Like China
- (pp. 196-233)
Abstract
We construct a growth model consistent with China's economic transition: high output growth, sustained returns on capital, reallocation within the manufacturing sector, and a large trade surplus. Entrepreneurial firms use more productive technologies, but due to financial imperfections they must finance investments through internal savings. State-owned firms have low productivity but survive because of better access to credit markets. High-productivity firms outgrow low-productivity firms if entrepreneurs have sufficiently high savings. The downsizing of financially integrated firms forces domestic savings to be invested abroad, generating a foreign surplus. A calibrated version of the theory accounts quantitatively for China's economic transition. (JEL E21, E22, E23, F43, L60, O16, O53, P23, P24, P31)Citation
Song, Zheng, Kjetil Storesletten, and Fabrizio Zilibotti. 2011. "Growing Like China." American Economic Review, 101 (1): 196-233. DOI: 10.1257/aer.101.1.196Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E22 Capital; Investment; Capacity
- E23 Macroeconomics: Production
- L60 Industry Studies: Manufacturing: General
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P23 Socialist Systems and Transitional Economies: Factor and Product Markets; Industry Studies; Population
- P24 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure; Money; Inflation