Working Paper: NBER ID: w31351
Authors: Jess Fernández-Villaverde; Lee E. Ohanian; Wen Yao
Abstract: This paper studies China's four-fold increase in per capita GDP relative to the U.S. between 1995 and 2019. First, we argue that China's growth pattern is very similar to that of several other East Asia economies that initially grew very quickly. Second, we show that a minimalist Ramsey-Cass-Koopmans model with a parsimonious TFP catch-up process can account for China's growth path and the growth paths of other East Asia economies at a similar stage of development. The growth paths of other East Asia economies and the model predictions suggest that China's growth will substantially slow, so much so that we find the U.S. growth rate will likely be higher than China's by 2043. We also find that China's income per capita will level off at roughly 44% of the U.S. level around 2100.
Keywords: No keywords provided
JEL Codes: E10; E20; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| TFP catch-up (F16) | economic growth (O49) |
| diminishing TFP catch-up (O49) | future economic performance (P17) |
| initial TFP level (F16) | TFP catch-up (F16) |
| asymptotic TFP bound relative to the US (D24) | TFP catch-up (F16) |
| speed of catch-up (O47) | TFP catch-up (F16) |
| China's real per capita GDP increase (F62) | TFP catch-up (F16) |
| growth paths of other East Asian economies (O53) | common causal mechanism (E71) |
| US economy growth rate (O51) | China's growth rate (O44) |