IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/19662.html
   My bibliography  Save this paper

China: An Institutional View of an Unusual Macroeconomy

Author

Listed:
  • David Dollar
  • Benjamin F. Jones

Abstract

China presents several macroeconomic patterns that appear inconsistent with standard stylized facts about economic development and hence inconsistent with the standard neoclassical growth model. We show that Chinese macroeconomic patterns instead appear consistent with an environment where state control of factor markets can promote aggressive output goals. We consider the micro-institutional features that can sustain this behavior, emphasizing the hukou system and state control over capital allocation, and present a simple model built on these features. The model can explain several puzzling facts about the Chinese economy, including its unusually low labor share and unusually high saving and investment rates. Interestingly, the model also shows that free-market reforms can initially take the economy further from global macroeconomic norms.

Suggested Citation

  • David Dollar & Benjamin F. Jones, 2013. "China: An Institutional View of an Unusual Macroeconomy," NBER Working Papers 19662, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19662
    Note: DEV EFG POL PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w19662.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Knight & Lina Song & Jia Huaibin, 1999. "Chinese rural migrants in urban enterprises: Three perspectives," Journal of Development Studies, Taylor & Francis Journals, vol. 35(3), pages 73-104.
    2. Jiang, Shiqing & Lu, Ming & Sato, Hiroshi, 2012. "Identity, Inequality, and Happiness: Evidence from Urban China," World Development, Elsevier, vol. 40(6), pages 1190-1200.
    3. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    4. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    5. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
    6. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 61-102.
    7. Meng, Xin & Zhang, Junsen, 2001. "The Two-Tier Labor Market in Urban China: Occupational Segregation and Wage Differentials between Urban Residents and Rural Migrants in Shanghai," Journal of Comparative Economics, Elsevier, vol. 29(3), pages 485-504, September.
    8. Y. Xu, 2000. "Forecasting Labor Supply in Urban China: Integrating Demographic Dynamics and Socioeconomic Transition," Working Papers ir00011, International Institute for Applied Systems Analysis.
    9. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    10. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    11. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72, National Bureau of Economic Research, Inc.
    12. Nicholas R. Lardy, 2012. "Sustaining China's Economic Growth after the Global Financial Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6260, April.
    13. Lu, Zhigang & Song, Shunfeng, 2006. "Rural-urban migration and wage determination: The case of Tianjin, China," China Economic Review, Elsevier, vol. 17(3), pages 337-345.
    14. Lee, Leng, 2012. "Decomposing wage differentials between migrant workers and urban workers in urban China's labor markets," China Economic Review, Elsevier, vol. 23(2), pages 461-470.
    15. Park, Albert & Wang, Dewen, 2010. "Migration and Urban Poverty and Inequality in China," IZA Discussion Papers 4877, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to model China
      by Economic Logician in Economic Logic on 2013-12-17 21:03:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edward Whitfield, 2016. "China and the Great Doubling: Racing to the Top or Bottom of Global Labour Standards?," Global Policy, London School of Economics and Political Science, vol. 7(1), pages 37-45, February.
    2. Chen, Shenglan & Ma, Hui & Teng, Haimeng & Wu, Qiang, 2022. "Banking liberalization and corporate tax planning: Evidence from natural experiments," Journal of Corporate Finance, Elsevier, vol. 76(C).
    3. Michel Aglietta & Guo Bai, 2016. "China’s 13th Five-Year Plan. In Pursuit of a “Moderately Prosperous Society”," CEPII Policy Brief 2016-12, CEPII research center.
    4. Chmura, Thorsten & Goerg, Sebastian J. & Weiss, Pia, 2016. "Natural groups and economic characteristics as driving forces of wage discrimination," European Economic Review, Elsevier, vol. 90(C), pages 178-200.
    5. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    6. Yuyan Tan & Yang Ji & Yiping Huang, 2016. "Completing China's Interest Rate Liberalization," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(2), pages 1-22, March.
    7. Pang, Ke & Siklos, Pierre L., 2016. "Macroeconomic consequences of the real-financial nexus: Imbalances and spillovers between China and the U.S," Journal of International Money and Finance, Elsevier, vol. 65(C), pages 195-212.
    8. Guangdong Xu, 2015. "The Institutional Foundations of China’s Unbalanced Economy," Europe-Asia Studies, Taylor & Francis Journals, vol. 67(9), pages 1351-1370, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vendryes, Thomas, 2011. "Migration constraints and development: Hukou and capital accumulation in China," China Economic Review, Elsevier, vol. 22(4), pages 669-692.
    2. Yao, Yang, 2014. "The Chinese Growth Miracle," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 943-1031, Elsevier.
    3. Song, Yang, 2014. "What should economists know about the current Chinese hukou system?," China Economic Review, Elsevier, vol. 29(C), pages 200-212.
    4. M. Albert & C. Jude & C. Rebillard, 2015. "The Long Landing Scenario: Rebalancing from Overinvestment and Excessive Credit Growth. Implications for Potential Growth in China," Working papers 572, Banque de France.
    5. Cubizol, Damien, 2018. "Transition and capital misallocation: the Chinese case," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 88-115.
    6. Ju, Jiandong & Shi, Kang & Wei, Shang-Jin, 2021. "Trade reforms and current account imbalances," Journal of International Economics, Elsevier, vol. 131(C).
    7. Bruno Decreuse & Paul Maarek, 2015. "FDI and the Labor Share in Developing Countries : A Theory and Some Evidence," Annals of Economics and Statistics, GENES, issue 119-120, pages 289-319.
    8. Ye, Longfeng & Robertson, Peter E., 2019. "Hitting the Great Wall: Structural change and China's growth slowdown," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    9. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
    10. Barker, Tom & Üngör, Murat, 2019. "Vietnam: The next asian Tiger?," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 96-118.
    11. Vahan Sargsyan, 2015. "Differential Treatment in the Chinese Labor Market. Is Hukou Type the Only Problem?," CERGE-EI Working Papers wp548, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    12. Nicolas Coeurdacier & Stéphane Guibaud & Keyu Jin, 2015. "Credit Constraints and Growth in a Global Economy," American Economic Review, American Economic Association, vol. 105(9), pages 2838-2881, September.
    13. Yuling Cui & Daehoon Nahm & Massimiliano Tani, 2017. "Employment Choice And Ownership Structure In Transitional China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 325-344, June.
    14. Xubei Luo & Nong Zhu, 2020. "Hub-Periphery Development Pattern and Inclusive Growth: Case Study of Guangdong Province," CIRANO Working Papers 2019s-39, CIRANO.
    15. LIU Yang & KAWATA Keisuke, 2015. "Labor Market and the Native-Immigrant Wage Gap: Evidence from urban China," Discussion papers 15142, Research Institute of Economy, Trade and Industry (RIETI).
    16. Lv, Bingyang & Liu, Yongzheng & Li, Yan, 2020. "Fiscal incentives, competition, and investment in China," China Economic Review, Elsevier, vol. 59(C).
    17. Ju, Jiandong & Shi, Kang & Wei, Shang-Jin, 2021. "Trade reforms and current account imbalances," Journal of International Economics, Elsevier, vol. 131(C).
    18. Halvor Mehlum & Ragnar Torvik & Simone Valente, 2013. "China s Savings Multiplier," Working Papers No 4/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    19. Wang, Yan & Conesa, Juan Carlos, 2022. "The role of demographics and migration for the future of economic growth in China," European Economic Review, Elsevier, vol. 144(C).
    20. Chen, Yiu Por (Vincent) & Zhang, Yuan, 2018. "A decomposition method on employment and wage discrimination and its application in urban China (2002–2013)," World Development, Elsevier, vol. 110(C), pages 1-12.

    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19662. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.