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Functional Distribution of Income and Economic Growth in the Chinese Economy, 1978-2007

Author

Listed:
  • Ricardo Molero Simarro

    (Departamento de Economía Aplicada I, Universidad Complutense de Madrid, Spain)

Abstract
This paper seeks to analyse the relationship between functional distribution of income, aggregate demand and growth in Chinese reform economy. For this purpose the Bhaduri-Marglin Model is used, stating the theoretical possibility of both profit-led and wage-led growth regimes. Subsequently, the principal literature on the evolution of factor's shares in China is reviewed. The statistical series for the period 1978-2007 are reconstructed in order to carry out our analysis of the relations between capital's share and investment, on one hand; and labour's share and consumption, on the other. Supported by the Model's preliminary estimations, it is argued that Chinese growth has been largely profit-driven. Finally, the implications are presented vis-a-vis concerning Chinese economic prospects.

Suggested Citation

  • Ricardo Molero Simarro, 2011. "Functional Distribution of Income and Economic Growth in the Chinese Economy, 1978-2007," Working Papers 168, Department of Economics, SOAS University of London, UK.
    • Handle: RePEc:soa:wpaper:168
    as

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    File URL: https://www.soas.ac.uk/sites/default/files/2022-10/economics-wp168.pdf
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    References listed on IDEAS

    as
    1. Chen, Shaohua & Ravallion, Martin, 2008. "China is poorer than we thought, but no less successful in the fight against poverty," Policy Research Working Paper Series 4621, The World Bank.
    2. Özlem Onaran & Engelbert Stockhammer, 2005. "Two Different Export-Oriented Growth Strategies: Accumulation and Distribution in Turkey and South Korea," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 65-89, January.
    3. Emilie Daudey & Cecilia Garcia-Penalosa, 2007. "The personal and the factor distributions of income in a cross-section of countries," Journal of Development Studies, Taylor & Francis Journals, vol. 43(5), pages 812-829.
    4. A. B. Atkinson, 2009. "Factor shares: the principal problem of political economy?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(1), pages 3-16, Spring.
    5. Khan, Azizur Rahman & Riskin, Carl, 2001. "Inequality and Poverty in China in the Age of Globalization," OUP Catalogue, Oxford University Press, number 9780195136494.
    6. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    7. Shaohua Chen & Martin Ravallion, 2010. "The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1577-1625.
    8. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(1), pages 139-159, January.
    9. Eckhard Hein & Lena Vogel, 2008. "Distribution and growth reconsidered: empirical results for six OECD countries," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(3), pages 479-511, May.
    10. Mr. Jahangir Aziz, 2006. "Rebalancing China’s Economy: What Does Growth Theory Tell Us?," IMF Working Papers 2006/291, International Monetary Fund.
    11. Minami, Ryoshin & Hondai, Susumu, 1995. "An Evaluation of the Enterprise Reform in China: Income Share of Labor and Profitability in the Machine Industry," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 36(2), pages 125-143, December.
    12. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January.
    13. Xinhua He & Yongfu Cao, 2007. "Understanding High Saving Rate in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(1), pages 1-13, January.
    14. World Bank, 2003. "China - Promoting Growth with Equity : Country Economic Memorandum," World Bank Publications - Reports 14643, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Razmi, Arslan, 2015. "Growth and Distribution in Low Income Economies: Modifying Post Keynesian Analysis in Light of Theory and History," UMASS Amherst Economics Working Papers 2015-16, University of Massachusetts Amherst, Department of Economics.
    2. Onaran, Özlem. & Galanis, Giorgos., 2012. "Is aggregate demand wage-led or profit-led? National and global effects," ILO Working Papers 994786233402676, International Labour Organization.
    3. Özlem Onaran & Giorgos Galanis, 2013. "Income distribution and aggregate demand: A global Post-Keynesian model," Working Papers PKWP1304, Post Keynesian Economics Society (PKES).
    4. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931.
    5. Engelbert Stockhammer & Ozlem Onaran, 2013. "Wage-led growth: theory, evidence, policy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 61-78, January.
    6. repec:ilo:ilowps:478623 is not listed on IDEAS
    7. Bruno Jetin & Ozan Ekin-Kurt & Anna Su, 2012. "Unbalanced distribution of income and Unbalanced Chinese Growth: Single Equation Estimations Based on Bhaduri/Marglin Model," Post-Print halshs-03244032, HAL.
    8. repec:ilo:ilowps:470932 is not listed on IDEAS
    9. Hein, Eckhard, & Mundt, Matthias., 2012. "Financialisation and the requirements and potentials for wage-led recovery : a review focussing on the G20," ILO Working Papers 994709323402676, International Labour Organization.

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    More about this item

    Keywords

    China; Economic Reform; Factor's Shares; Aggregate Demand; Profit-Led Growth.;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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