SSE/EFI Working Paper Series in Economics and Finance
Yudong Yao and Johan Lyhagen
Using A Trade-induced Catch-up Model to Explain China's Provincial Economic Growth 1978-97
Abstract: This paper attempts to make an innovative contribution to
the growth literature by proposing a trade-induced catch up model in which
imitation benefit is explicitly modelled and trade knowledge spillover is
considered. The resulting income dynamics is in the error correction form.
The Pooled Mean Group dynamic heterogeneous panel data estimator (Pesaran
and Shin, 1997) is used to empirically implement the error correction
catch-up dynamics. The application is to China's provinces during the
reform period 1978-97. The main findings are: there is a positive long-run
relationship among per capita GDP, per capita capital and per capita trade,
which can account for China's economic growth miracle during the last two
decades. Moreover, the trade knowledge spillover benefits
disproportionately to individual provinces and thus cause significant
differences of growth growth across the provinces.
Keywords: Growth; dynamic panel; (follow links to similar papers)
JEL-Codes: C22; C23; F14; O11; (follow links to similar papers)
41 pages, February 22, 2001
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