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Inspiration vs. perspiration in economic development of the Former Soviet Union and China (ca. 1920–2010)

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  • Bas Leeuwen
  • Dmitry Didenko
  • Péter Földvári

Abstract

type="main" xml:id="ecot12060-abs-0001"> Here, we discuss the role of both perspiration factors (physical and human capital) and inspiration factors (Total Factor Productivity) in the economic development of the Former Soviet Union area (FSU) and China, ca. 1920–2010. Using a newly created dataset, we find that during the Socialist central-planning period, economic growth in both countries was largely driven by physical capital accumulation. This finding follows logically from the development policies in place at that time. During their transition periods, (i.e., starting from the late 1970s in China and the late 1980s in the FSU), China managed to keep technical inefficiency of production factors in check, largely by massively increasing its human capital, thereby lowering the physical-to-human capital ratio. In contrast, the FSU accomplished a similar outcome largely through reducing its stock of physical capital. As a result, although there was little difference in technical efficiency between these two economies, China's emphasis on human capital formation made it easier for this country to improve its general productivity and to increase per capita growth. This changed in the late 1990s and early 2000s, when the FSU began to recover economically, regaining its 1990 levels of output and productivity.

Suggested Citation

  • Bas Leeuwen & Dmitry Didenko & Péter Földvári, 2015. "Inspiration vs. perspiration in economic development of the Former Soviet Union and China (ca. 1920–2010)," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(1), pages 213-246, January.
  • Handle: RePEc:bla:etrans:v:23:y:2015:i:1:p:213-246
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    File URL: http://hdl.handle.net/10.1111/ecot.2015.23.issue-1
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    Cited by:

    1. Gregory Brock & Constantin Ogloblin, 2018. "Russian 1998–2007 TFP decomposed: some inspiration emerging from inherited Soviet legacy," Economic Change and Restructuring, Springer, vol. 51(2), pages 135-151, May.
    2. Mitsuhiko Kataoka, 2022. "Perspiration versus inspiration: sources of national and provincial output growth in Indonesia [1990–2015] using province-level non-parametric frontier analysis," Asia-Pacific Journal of Regional Science, Springer, vol. 6(1), pages 113-139, February.

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