ECN 310 Essay Three -China’s GDP Growth Decomposition: 1952-2005
Try to organize your answers to the five questions in a coherent way in an essay titled “China’s GDP Growth Decomposition: 1952-2005”. In other words, your essay should look like a paper that decomposes and analyzes China’s GDP growth rates during the period 1952-2005, not an assignment that answers five questions.
Read the requirements and use at least 5 sources for reference.
ECN 310 The Chinese Economy Essay Three Instructor: Mengxiao Liu 1 ECN 310 Essay Three China’s GDP Growth Decomposition: 1952-2005 Due Date: Midnight on Sunday, November 17th, 2019, via Turnitin on Blackboard The end of this document contains further instructions. Please read. Length requirement: 1500-2000 words. In Lecture 7 (slides 47-51), we studied a Cobb-Douglas production function:
Instructions I. How to Calculate Growth Rates
There are two ways to calculate the growth rate.
1. If you treat GDP, capital stock, labor, and human capital as continuous variables, their growth rates can be calculated using natural logs. For example, the formula for calculating the average GDP growth rates between 1952 and 1978 is
CgDP.1952-1,78 = (exp - l) X 100, (5)
where exp( ) is an exponential function, and ln( ) is the natural log function. For example, the excel file shows that China's GDP index in 1978 and 1952 are respectively 13.71 and 4.46, so GDP1978 = 13.71 and GDP1952 = 4.46. Substitute these two values into equation (5) to get GgDP 1952-1978 * 4.4%, which is consistent with the number reported in Table 1. The growth rate of the other variables (capital stock, labor, and human capital) can be calculated in a similar manner.
2. A simpler way to calculate the growth rates of GDP, capital stock, labor, and human capital is to calculate the annual growth rates of each variable, then take the average for a given time period.
For example, the excel file shows that China's GDP index between 1952 and 1957 are:Year GDP index1952 4.461953 4.901954 5.001955 5.351956 5.871957 6.11
^GDP,1952-1953 — (---1) X 100 — (-;——--1) X 100 ~ 0.099Year GDP growth rate1952-1953 0.0991953-1954 0.0221954-1955 0.0701955-1956 0.0971956-1957 0.041Average 0.066
China's GDP growth between 1952 and 1953 can be calculated as
''GDP1953 — GDP1952 N /4.90 — 4.46 -— — 1) X 100 = (-——
GDP1952 ' ' 4.46
Using the same formula to calculate China's GDP growth rates between 1952 and 1957:2The average growth rate between 1952-1957 is simply 0.066, or 6.6%, which is roughly consistent with the number reported in Table 1.
Economically, the two methods are equivalent, but mathematically they may generate slightly different numbers. Since the authors used the first method to calculate Table 1, the first method generates identical numbers as Table 1. The second method generates numbers that are slightly different from Table 1. You can use either method to calculate the growth rates.2 If you need more training on calculating growth rates in excel, watch the following YouTube video:https://youtu(dot)be/mHoSPOa4dSg.
ECN 310 Essay Three -China’s GDP Growth Decomposition: 1952-2005
Name
ECN 310 The Chinese Economy
Instructor:
Date
China’s GDP growth rates during the period 1952-2005,
Period
GDP growth
Fixed Capital
Labor
Human capital
TFP
1955-1965
3.80%
5.20%
1.40%
2.00%
0.40%
1966-1976
4.20%
7.50%
2.40%
3.10%
-0.80%
1978-1990
8.90%
8.30%
3.00%
3.90%
3.20%
1991-1999
10.60%
10.40%
1.10%
1.70%
5.10%
2000-2005
9.50%
12.60%
1.00%
1.80%
3.10%
Contribution to Measured GDP Growth from
Period
Fixed Capital
Labor
Human capital
TFP
1952-1978
54.0922
0.00%
31.0379
14.8700
1952-1957
12.7809
0.00%
14.8433
72.3758
1957-1978
69.3933
0.00%
37.0361
-6.4294
1978-2005
43.6934
0.00%
16.2027
40.1039
1978-1995
37.5241
0.00%
19.2734
43.2025
1995-2005
55.0142
0.00%
10.5678
34.4180
Contribution to Measured GDP Growth from
Period
Fixed Capital
Labor
Human capital
TFP
1955-1965
59.7649
0.00%
30.8775
9.3576
1966-1976
77.0830
0.00%
41.5284
-18.6114
1978-1990
39.8138
0.00%
24.6520
35.5342
1991-1999
42.4481
0.00%
9.3248
48.2271
2000-2005
57.1022
0.00%
10.6205
32.2773
China's Gross Domestic Product (GDP) has grown rapidly in the past 40 years where the country has gradually moved away from a planned economy to a mixed economy where capitalism thrives, albeit with the state controlling some economic activities. China's economic history can be divided into different distinct periods, the Chinese economy prior to 1949, the socialist era in 1949-1978 and market transition where there was focus on trade openness and reintegration into the global economy.
China's economy in the period 1955-1965 was still agricultural based Mao Zedong Chinese communist revolutionary and Chairman of the People's Republic of China, focused on a socialist economic model. China’s rural areas had a system of communes, and the collective farms were the pillar of Maoism. In 1955 owning private land was eliminated in the rural areas where the rural peasants worked in collectives, and there was poor redistribution of the resources. The socialist/ communist economic model in the People's Republic of China (PRC) gave the state power to influence economic activities in a way that favored or restricted certain economic activities, and the markets had a minimal role in economic growth.
The average GDP growth in 1955-1965 was 3.80%, and the Total factor productivity (TFP) was 0.40% the agriculture-based economy would grow at a higher when reforms were implemented, but there was still underdevelopment. The Great Leap Forward (1958-1961) focused on agricultural collectivization and rural rapid industrialization, but there were challenges including famine related to disruption of economic activities. Nonetheless, there was growth during the period as previously the economy was stagnant for many decades before 1949 (Du, Wang & Wu, 2014). Even with the high labor available, the Great Leap Forward failed to integrate the workers in the economy, and failure of the plan led to readjustment to improve the economy.
While the economy grew in the decade 1966 – 1976, the TFP was -0.8% having decreased compared to the period 1955-1965. Since the TFP decreased this implies that there was a decrease on productivity and economic efficiency of the labor and capital inputs (Feng et al., 2017). The Cultural Revolution in 1966 – 1976 was a period where Chairman Mao purged his opponents from the Communist Party and focused on instilling revolutionary values to party members, and especially the Chinese youth. The period 1966-1976 was a time of great upheaval. The Cultural Revolution was also supported to root out capitalism, and moderates no longer held powerful positions in the Communist Party.
In 1978- 1990 the GDP economic growth rate was 8.90%, will the TFP was 3.2% and the changes were most linked to Chinese economic reforms. The pro-market reforms after Mao's death in the 1978 there was decollectivization of agriculture and liberalization in China was very special because it was based on a dual pricing system. Farmers working in the state-own...
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