Growing Like China Song, Zheng; Storesletten, Kjetil; Zilibotti, Fabrizio
The American economic review,
02/2011, Volume:
101, Issue:
1
Journal Article
Peer reviewed
Open access
We construct a growth model consistent with China's economic transition: high output growth, sustained returns on capital, reallocation within the manufacturing sector, and a large trade surplus. ...Entrepreneurial firms use more productive technologies, but due to financial imperfections they must finance investments through internal savings. State-owned firms have low productivity but survive because of better access to credit markets. High-productivity firms outgrow low-productivity firms if entrepreneurs have sufficiently high savings. The downsizing of financially integrated firms forces domestic savings to be invested abroad, generating a foreign surplus. A calibrated version of the theory accounts quantitatively for China's economic transition.
We study the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China. We use data from a panel of Chinese ...(prefecture-level) cities from 1988 to 2010. Our difference-in-difference estimation exploits the variation in the establishment of SEZ across time and space. We find that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20%. This finding is confirmed with alternative specifications and in a sub-sample of inland provinces, where the selection of cities to host the zones was based on administrative criteria. The main channel is a positive effect on physical capital accumulation, although SEZ also have a positive effect on total factor productivity and human capital investments. We also investigate whether there are spillover effects of SEZ on neighboring regions or cities further away. We find positive and often significant spillover effects.
We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for ...innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation-based strategy with short-term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment-based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment-based strategy, may be beneficial. However, these policies may have significant long-run costs because they make it more likely that a society will be trapped in the investment-based strategy and fail to converge to the world technology frontier.
We study a dynamic general equilibrium model where innovation takes the form of the introduction of new goods whose production requires skilled workers. Innovation is followed by a costly process of ...standardization, whereby these new goods are adapted to be produced using unskilled labor. Our framework highlights a number of novel results. First, standardization is both an engine of growth and a potential barrier to it. As a result, growth is an inverse U-shaped function of the standardization rate (and of competition). Second, we characterize the growth and welfare maximizing speed of standardization. We show how optimal protection of intellectual property rights affecting the cost of standardization vary with the skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that, depending on how competition between innovating and standardizing firms is modelled and on parameter values, a new type of multiplicity of equilibria may arise. Finally, we study the implications of our model for the skill premium and we illustrate novel reasons for linking North–South trade to intellectual property rights protection.
We study the implications of offshoring on innovation, technology, and wage inequality in a Ricardian model with directed technical change. Profit maximization determines both the extent of ...offshoring and the direction of technological progress. A fall in the offshoring cost induces technical change with an ambiguous factor bias. When the initial cost of offshoring is high, an increase in offshoring opportunities causes a fall in the real wages of unskilled workers in industrial countries, skill-biased technical change and rising skill premia. When the offshoring cost is sufficiently low, instead, offshoring induces technical change biased in favor of the unskilled workers.
We study whether the effects on registered manufacturing output of dismantling the License Raj—a system of central controls regulating entry and production activity in this sector—vary across Indian ...states with different labor market regulations. The effects are found to be unequal across Indian states with different labor market regulations. In particular, following delicensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments.
We develop a theory of parent-child relations that rationalizes the choice between alternative parenting styles (as set out in Baumrind (1967)). Parents maximize an objective function that combines ...Beckerian altruism and paternalism towards children. They can affect their children's choices via two channels: either by influencing children's preferences or by imposing direct restrictions on their choice sets. Different parenting styles (authoritarian, authoritative, and permissive) emerge as equilibrium outcomes and are affected both by parental preferences and by the socioeconomic environment. Parenting style, in turn, feeds back into the children's welfare and economic success. The theory is consistent with the decline of authoritarian parenting observed in industrialized countries and with the greater prevalence of more permissive parenting in countries characterized by low inequality.
GROWING AND SLOWING DOWN LIKE CHINA Zilibotti, Fabrizio
Journal of the European Economic Association,
10/2017, Volume:
15, Issue:
5
Journal Article
Peer reviewed
Open access
This article is based on the presidential address delivered at the EEA Annual Congress 2016. It discusses China’s institutional and economic transformation through the lens of the model of growth and ...convergence developed in Acemoglu, Aghion, and Zilibotti (JEEA 2006), which emphasizes the dichotomy between investment- and innovation-led growth. The economic reforms introduced in the 1980s and 1990s have enabled the Chinese economy to grow at historically unprecedented rates through fostering investment, reallocation, and technology adoption from abroad. The Chinese stimulus package introduced in 2008 appears to have prolonged the longevity of China’s investment driven growth beyond its optimal point. Over the last decade, China has activated the engine of innovation-led growth. The article discusses the virtues and limits of such ongoing transition, based on research in progress using firm-level data on R&D and productivity growth. Finally, it provides an appraisal of the institutional and policy reforms that are necessary for China to continue on its path of rapid convergence.
In this sexcerpt from their book, Love, Money, and Parenting: How Economics Explains the Way We Raise Our Kids, Matthias Doepke and Fabrizio Zilibotti discuss the phenomenon of helicopter parenting, ...in which parents spend more time monitoring their kids’ activities. They present empirical evidence for a rise in parental involvement and suggest that greater income inequality and the related higher stakes surrounding children’s educational success may be driving parents to be more attentive.
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