China’s GDP Growth Decomposition: 1952-2005 Economics Essay

-China’s GDP Growth Decomposition: 1952-2005
Name
ECN 310 The Chinese Economy
Mengxiao Liu
Date
China’s GDP growth rates 1952-2005
Period

GDP growth

Fixed Capital

Labor

Human capital

TFP

1955-1965

3.8%

5.2%

1.4%

2.0%

0.4%

1966-1976

4.2%

7.5%

2.4%

3.1%

-0.8%

1978-1990

8.9%

8.3%

3.0%

3.9%

3.2%

1991-1999

10.6%

10.4%

1.1%

1.7%

5.1%

2000-2005

9.5%

12.6%

1.0%

1.8%

3.1%


Contribution to Measured GDP Growth from


Period

Fixed Capital

Labor

Human capital

TFP

1952-1978

54.09

0.00

31.04

14.87

1952-1957

12.78

0.00

14.84

72.38

1957-1978

69.39

0.00

37.04

-6.43

1978-2005

43.69

0.00

16.20

40.10

1978-1995

37.52

0.00

19.27

43.20

1995-2005

55.01

0.00

10.57

34.42


Contribution to Measured GDP Growth from


Period

Fixed Capital

Labor

Human capital

TFP

1955-1965

59.76

0.00

30.88

9.36

1966-1976

77.08

0.00

41.53

-18.61

1978-1990

39.81

0.00

24.65

35.53

1991-1999

42.45

0.00

9.32

48.23

2000-2005

57.10

0.00

10.62

32.28

The average income level of a citizen of a country is often approximated using the ratio between the wealth generated each year in an economic territory, generally its Gross Domestic Product (GDP), dividing it number of people or population. That ratio, the GDP per capita, is one of the most used economic indicators, and the GDP information also provides insights on the labor productivity, which shows the share of GDP that is generated by the workers. China's (GDP) has grown at a rapid rate in the past 40 years. Increase in the GDP of a country may be due to efficiency gains in the allocation of the labor input factor and capital , which increases employment either by an increase in the employed population, either because of the two factors at the same time. From 1978, there has been improvement in labor productivity in China as the GDP has grown.
In 1955-1965, GDP growth in China was 3.8% and TFP 0.40%. Chairman was the leader of China and created a socialist economic structure where central planning influenced economic activities, with focus on collectivization of rural agriculture and industrialization (Chen, 2016). Rural peasants worked in the collective farms, and the industry was largely underdeveloped. When Mao Zedong ascended to power in 1949, China was poor and devastated by war and the country was largely rural.
The contribution of capital stock to China’s GDP growth during 1955-1965 is 59.8%, while human capital was 30.41%. In the agricultural-based economy, the 3.8 % G...