Capital goods imports and long-run growth: Is the Chinese experience relevant to developing countries?

In this paper, we analyze the role played by capital goods imports in the long-run growth of developing countries. We focus in the case of the Chinese economy in the last few decades. We find evidence that the ratio of imported to domestic capital goods, that is, the composition of investment, as we...

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Bibliographic Details
Published in:Journal of policy modeling 2013-09, Vol.35 (5), p.781-797
Main Authors: Herrerias, M.J., Orts, Vicente
Format: Article
Language:English
Subjects:
Capital accumulation
Capital goods
China
Developing countries
Economic growth
Economic models
Economic policy
Economic theory
Gross domestic product
Growth
Growth rates
Imports
Imports of capital goods
Investment
LDCs
Openness
Studies
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Summary:In this paper, we analyze the role played by capital goods imports in the long-run growth of developing countries. We focus in the case of the Chinese economy in the last few decades. We find evidence that the ratio of imported to domestic capital goods, that is, the composition of investment, as well as the capital accumulation (both physical and human), was key determinants of the long-run growth rate of per capita GDP over the analyzed period. Furthermore, our results are also consistent with the hypothesis that the link between trade openness and long-run growth operates mainly through imports. This finding supports some recent developments of Schumpeterian models of growth, and the very specific economic policy recommendations arising thereof. In short, these models state that, in the early stages of growth, government intervention to encourage an investment-based strategy, with emphasis on large investment efforts and the adoption of foreign technology, could be an appropriate strategy for development.
ISSN:0161-8938
1873-8060
DOI:10.1016/j.jpolmod.2013.02.006