Catch‐up cycle: A general equilibrium framework. Issue 4 (30th June 2017)

• Record Type: Journal Article
• Authors: Liu, Peilin; Jia, Shen; Zhang, Xun
• Is Part Of: Review of development economics. Volume 21:Issue 4(2017:Nov.)
• Page Start: 1327
• Page End: 1340
• Publication Date: 2017-06-30
• Subjects: Economic development -- Periodicals; 330
• DOI: 10.1111/rode.12330
• Languages: English
• ISSNs: 1363-6669

Abstract

Abstract: 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.