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Brad DeLong's Grasping Reality 2019-12-13 19:39:47

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Back late in the decade of the 2000s, Barry Eichengreen opined that China's middle-9nc0me trap growth slowdown might began... now... Barry Eichengreen: Escaping the Middle-Income Trap https://pdfs.semanticscholar.org/4d9b/9d3f8041e4bc9e133182180ea2a5d85b11a5.pdf: 'Growth slowdowns typically occur at per capita in- comes of 16,700. At that point, the per capita growth rate slows from 5.6 percent to 2.1 percent, or by an average of 3.5 percentage points. For purposes of comparison, note that China’s per capita GDP, in constant 2005 international (purchasing power parity) prices, was 8,500 in 2007. Extrapolating its growth rate between then and now, China will reach the threshold value of 15,100 around 2016—that is to say, five years from now... ...There are multiple reasons to

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Back late in the decade of the 2000s, Barry Eichengreen opined that China's middle-9nc0me trap growth slowdown might began... now... Barry Eichengreen: Escaping the Middle-Income Trap https://pdfs.semanticscholar.org/4d9b/9d3f8041e4bc9e133182180ea2a5d85b11a5.pdf: 'Growth slowdowns typically occur at per capita in- comes of 16,700. At that point, the per capita growth rate slows from 5.6 percent to 2.1 percent, or by an average of 3.5 percentage points. For purposes of comparison, note that China’s per capita GDP, in constant 2005 international (purchasing power parity) prices, was 8,500 in 2007. Extrapolating its growth rate between then and now, China will reach the threshold value of 15,100 around 2016—that is to say, five years from now...

...There are multiple reasons to doubt that high growth in a relatively poor developing country will continue forever. Growth in late-developing countries is associated with a demographic transition that yields a dividend in its early stages but a penalty later.... This demographic dividend has been especially important in East Asia because the demographic transition there began earlier than in Southeast and South Asia and because it was compressed in time.... Then there is the fact that fast growth in developing countries is typically associated with the transfer of workers from underemployment in the rural sector to employment in urban manufacturing, something else that cannot continue forever.... Growth slowdowns are almost always total factor productivity (TFP) growth slowdowns.... This said, there is no iron law of slowdowns. There is considerable dispersion in the income levels at which they occur. Mean per capita income may be 16,700, as noted earlier, but the standard deviation is 6,000. The minimum is 10,000, the maximum 40,000... This variation, especially at the upper end, reflects the presence of influential outliers.... Hong Kong and Singapore.... Small open economies can grow by exporting without creating tensions with their partners or turning the terms of trade against themselves. They can rely on imported labor.... None of these conditions apply to large open econo- mies, including the country of special concern in this context, China...


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Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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