Abstract
We investigate whether China’s experience during 1952–2004 supports the balanced growth entailment of the neoclassical growth model. Estimation of long-run relations among output, consumption and investment for the full period reject the balanced growth hypothesis for both the national and regional economies. When the economic reforms of the late 1970s are modelled as a structural break by the methods of Johansen et al. (Economet J 3(2):216–249, 2000) and Perron (Econometrica 57(6):1361–1401, 1989), we find some evidence of balanced growth in the pre-break period but in the post-break period the ‘great ratios’ are trend-stationary, precluding fully balanced growth, though permitting a common (stochastic) productivity trend.
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Li, H., Daly, V. Testing the balanced growth hypothesis: evidence from China. Empir Econ 37, 185–200 (2009). https://doi.org/10.1007/s00181-008-0229-7
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DOI: https://doi.org/10.1007/s00181-008-0229-7