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Catch‐up cycle: A general equilibrium framework
Author(s) -
Liu Peilin,
Jia Shen,
Zhang Xun
Publication year - 2017
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12330
Subject(s) - stylized fact , economics , general equilibrium theory , openness to experience , per capita , business cycle , competition (biology) , imitation , capital (architecture) , productivity , monetary economics , technical progress , macroeconomics , microeconomics , social psychology , population , ecology , history , demography , archaeology , sociology , biology , psychology
Successful latecomers have certain stylized facts: an inverse U‐shaped GDP and capital per capita growth rates, high growth rates during the catch‐up period, and rapid structural changes. This paper proposes a general equilibrium framework and documents a catch‐up cycle that successful latecomers are likely to experience. Technology adoption or imitation and the diminishing marginal return to capital are the two driving forces of the catch‐up cycle. Technical gap and speed/efficiency of technical catching‐up are two fundamental determinants for successful catching‐up. Market competition, a beneficial financial system for resource allocation and openness are essential factors associated with speed/efficiency of technical catching‐up and thus with successful catching‐up. This paper concludes by a case study of China and sheds light on the different policy choices in various stages of the catch‐up cycle.