AccountingforEconomicGrowthinTaiwanandMainland.docVIP

Accounting for Economic Growth in Taiwan and Mainland China: A Comparative Analysis Gregory Chow, Princeton University Anloh Lin, Chunghua Institution for Economic Research Abstract: This paper provides a statistical summary of aggregate economic growth in Taiwan and mainland China using the standard national income accounting framework by decomposing aggregate growth into components due to growths in capital, labor and total factor productivity. For Taiwan, new series of capital stock and of human capital are constructed. The major findings include (a) the stability of input coefficients (under the assumption of constant returns) and of the rate of increase in TFP for the entire period 1951-1999, (b) a labor exponent of about 0.7 and a rate of annual increase in TFP of about 0.03, and (c) a slower exponential rate of growth of real gdp since 1987 to about 0.065 from the 1951-1999 average of 0.081 mainly as a result of the large reduction in the growth rate of labor input to half. For mainland China, a capital stock series of Chow (1993) was extended to 1998. The major findings include (a) the stability of the relative input coefficients for the entire period 1952-1998 but TFP did not increase until 1979, (b) a labor exponent of about 0.35 and a rate of increase in TFP of about 0.027 after 1979, and (c) the absence of equally large reduction in the rate of increase in labor input as in Taiwan and the smaller exponent of labor leading to a prospect of only a moderate reduction in future growth rate. 1. INTRODUCTION In the second half of the 20th century Taiwan and mainland China experienced different economic histories. They started with different initial conditions, adopted different development strategies during the first three decades and yet both succeeded in rapid development. It is the aim of this essay to provide a statistical summary of the growth histories of these two economies in a comparative perspective. The framework adopted is the familiar gro