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Heavy industry priority development strategy and economic growth: The economic logic of the inverted-U theory and economic history explanation

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  • Deng, Hongtu
  • Xu, Baoliang
  • Zhao, Yan
  • Xu, Yonghui

Abstract

Based on the objective fact that new China had a weak industrial base during the planned economy period and the policies implemented, this paper constructs a dynamic optimization model that includes the labor-intensive goods sector, the capital-intensive goods sector, and the final goods sector. The basic conclusion of the theoretical model is that there is an inverted-U relationship between total social output per capita and the share of heavy industry capital stock on the optimal dynamic path of capital accumulation with government intervention, i.e., the relationship is positive until a specific threshold is reached, beyond which it becomes negative. The results of the benchmark regressions and endogeneity tests confirm the inverted-U relationship, although the threshold share of heavy industry capital stock differs among the empirical models.

Suggested Citation

  • Deng, Hongtu & Xu, Baoliang & Zhao, Yan & Xu, Yonghui, 2022. "Heavy industry priority development strategy and economic growth: The economic logic of the inverted-U theory and economic history explanation," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 1-8.
    • Handle: RePEc:eee:streco:v:62:y:2022:i:c:p:1-8
    DOI: 10.1016/j.strueco.2022.04.005
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    References listed on IDEAS

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    Cited by:

    1. Wang, Xiaoyu & Sun, Yanlin & Peng, Bin, 2023. "Industrial linkage and clustered regional business cycles in China," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 59-72.

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    More about this item

    Keywords

    Heavy industry priority development strategy; Economic growth; Inverted-U theory;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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