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Working Paper
China: An Institutional View of an Unusual Macroeconomy
Author(s)
China presents several macroeconomic patterns that appear inconsistent with standard
stylized facts about economic development and hence inconsistent with the standard
neoclassical growth model. We show that Chinese macroeconomic patterns instead
appear consistent with an environment where state control of factor markets can
promote aggressive output goals. We consider the micro-institutional features that
can sustain this behavior, emphasizing the hukou system and state control over capital
allocation, and present a simple model built on these features. The model can
explain several puzzling facts about the Chinese economy, including its unusually low
labor share and unusually high saving and investment rates. Interestingly, the model
also shows that free-market reforms can initially take the economy further from global
macroeconomic norms.
Date Published:
2014
Citations:
Jones, Benjamin F., David Dollar. 2014. China: An Institutional View of an Unusual Macroeconomy.