ECN 310 China’s GDP Growth Decomposition: 1952-2005

China’s GDP Growth Decomposition: 1952-2005
Name
ECN 310
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

During 1955-1965, GDP growth in China was 3.8% and the TFP 0.40%. The economy of People's Republic China (PRC) under the leadership of Mao Zedong was closely linked with Communist Party of China (CPC). Mao who was the founder and leader of CCP (1935-1976) focused on collectivization of the agricultural sector and industrialization. The Chinese economy during Mao's leadership was mostly agricultural based and the majority of the population lived in rural areas, and the small-scale peasants, found work in the labor-intensive farms (Autor, Dorn & Hanson, 2016). Even with focus on industrialization, there was few or no use of modern techniques or machinery. The farms did not provide enough food to the population, and raw materials for industry and export. However, unlike the pre 1949 decades, there was growth as China was able to marshal the population to work n farms, where the economy had been stagnant for many years.
Mao sought a complete transformation of Chinese traditional society as a necessity to modernize the country, where economic, political, and social issue policies were based on a socialist model and they were subordinate to the party and were inspired by the USSR. There was absence of the market, lack of competition and isolation of the economy from the global economic system. The ideology supported political, social-economic and state intervention. By 1949, when Mao became China’s leader the country had been affected by war and the economic system and the Great Leap Forward (1958-1962) wa...