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Please See the Attachments, I also posted some class powerpoint Files.
First three attachments are the instruction of the assignment.
I just need Stage 1 of this assignment, about 750 words.
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2
Dalhousie University
Fall 2013
Economics 2213
Professor T. Cyrus
Emerging Giants: The Economic Rise of China and India
PAPER PROJECT
The paper project will examine an issue important to the development of China and/or India. The project will be done in groups of four or five, and will be submitted in stages throughout the term. The stages are due at the beginning of class on the following dates:
Stage 1
: Initial Data
Tuesday, October 1
Stage 2
: Hypothesis
Tuesday, October 15
Stage 3: Literature
Tuesday, November 5
Stage 4
: Analysis
Tuesday, November 19
Stage 5: Conclusion
Tuesday, December 3
Each stage must be both (1) submitted in paper at the beginning of class, and (2) submitted electronically to BbLearn. Excel spreadsheets should be submitted only to BbLearn.
Each stage will be assessed and returned to you with comments; you should use these comments as a guide for revising the stage, as well as for writing future stages. If you fail to hand in any stage on time, your project mark will be reduced by 5% out of your final grade. For Stage 5, write a conclusion, integrate all the revised stages into one cohesive document, and hand in the entire project. The written paper is worth 30% of your final grade; in addition, your participation in the project will be graded by your group-mates and will be worth 10% of your final grade.
Your inline citations and bibliographical references can be in any format, as long as you are consistent.
Potential Data Sources:
– World Bank World Development Indicators:
http://databank.worldbank.org/ddp/home.do
– Economic Freedom Network:
http://www.freetheworld.com/datasets_efw.html
– Polity IV:
http://www.systemicpeace.org/inscr/inscr.htm
– CIRI Human Rights Data:
http://ciri.binghamton.edu/index.asp
– Heritage Foundation Index of Economic Freedom:
http://www.heritage.org/Index/
– World Bank Governance Indicators:
http://info.worldbank.org/governance/wgi/index.asp
Other data sources are possible. If you are in doubt as to whether a data source or variable is an acceptable choice, ask.
Stage 1
This stage should be 500-750 words long. Choose one variable that you find interesting and that is available either for a wide variety of countries or over a period of time in a widely-used dataset, such as the World Bank’s World Development Indicators. Submit an Excel spreadsheet listing your data on the variable. You must either examine a wide range of countries (at least 75) at a point in time, or a single country (China or India) over a long period of time (at least 40 years). Define your variable of interest, explain why you find it interesting, and describe why it is important for China’s or India’s development.
For example:
– the poverty rate
– the ratio of men to women
– the saving rate
– the working-age population growth rate
– the growth rate of GDP per capita
– the World Bank governance index
– the CIRI human rights index
– the Polity democracy index
– CO2 emissions
Stage 2
This stage should be 500-750 words long. Find at least two other variables that you believe to affect your variable of interest, and describe why you think these variables are related. Collect data on these other variables and submit an Excel spreadsheet with your data. Present a hypothesis as to how your variables are related. Include a list of at least four economics articles that you will use in the following stage to support your hypothesis. All articles must be published in economics journals or appear in a reputable working paper series (such as the NBER or the World Bank). If you are unsure as to whether an article is acceptable, ask.
For example:
– My hypothesis is that the CIRI human rights index is positively related to GDP per capita (that is, a rise in GDP per capita leads to a rise in human rights) and is negatively related to whether a country was ever colonized.
Stage 3
This stage should be 1250-1750 words long. Prepare a literature review that is relevant to your hypothesis. Find at least four published economics journal articles that relate to your hypothesis. For each paper that you review, be sure to clearly present the author’s hypothesis and evidence to support that hypothesis, along with your evaluation of the author’s evidence and conclusions. Include a bibliography at the end of the stage.
Stage 4
This stage should be 750-1000 words long. Use Excel to find the correlation between each pair of your variables. Then use Excel to run a linear regression of your variable of interest (your dependent variable) on your independent variables, and write up your results. Your spreadsheet must be submitted via BbLearn. Instructions for the statistical work will be given in class.
Stage 5
This new work for this stage should be 500-750 words long, in addition to the previous work included. In this stage, write a conclusion to your paper and put all the stages together into one cohesive document. An effective conclusion describes the hypothesis and why it is interesting; it briefly reviews the data; it summarizes the empirical results; and it explains how the results relate to the existing literature. Your last paragraph should describe the economic policy implications of your results. Make sure to include a title page and a bibliography.
Dalhousie University
Fall 2013
Economics 2213
Professor T. Cyrus
Emerging Giants: The Economic Rise of China and India
Paper Project Marking Guidelines
Names:
____________________
Stage:
_______
____________________
____________________
____________________
____________________
_______
(10 points possible)
Ideas
_______
(10 points possible)
Organization and Coherence
_______
(10 points possible)
Support
_______
(10 points possible)
Style
_______
(10 points possible)
Mechanics
_______
(50 points possible)
Total
Overall comments:
Modeled after rubric used in the UC Davis English Department Composition Program
The A paper The B paper The C paper The D paper The F paper
Ideas Excels in responding to assignment.
Interesting, demonstrates
sophistication of thought. Central
idea/thesis is clearly communicated,
worth developing; limited enough to
be manageable. Paper recognizes
some complexity of its thesis: may
acknowledge its contradictions,
qualifications, or limits and follow
out their logical implications.
Understands and critically evaluates
its sources, appropriately limits and
defines terms.
A solid paper, responding
appropriately to assignment. Clearly
states a thesis/central idea, but may
have minor lapses in development.
Begins to acknowledge the
complexity of central idea and the
possibility of other points of view.
Shows careful reading of sources,
but may not evaluate them critically.
Attempts to define terms, not always
successfully.
Adequate but weaker and less
effective, possibly responding less
well to assignment. Presents central
idea in general terms, often
depending on platitudes or cliches.
Usually does not acknowledge other
views. Shows basic comprehension
of sources, perhaps with lapses in
understanding. If it defines terms,
often depends on dictionary
definitions.
Does not have a clear central idea or
does not respond appropriately to the
assignment. Thesis may be too vague
or obvious to be developed
effectively. Paper may
misunderstand sources.
Does not respond to the assignment,
lacks a thesis or central idea, and
may neglect to use sources where
necessary.
Organization &
coherence
Uses a logical structure appropriate
to paper’s subject, purpose, audience,
thesis, and disciplinary field.
Sophisticated transitional sentences
often develop one idea from the
previous one or identify their logical
relations. It guides the reader
through the chain of reasoning or
progression of ideas.
Shows a logical progression of ideas
and uses fairly sophisticated
transitional devices; e.g., may move
from least to more important idea.
Some logical links may be faulty,
but each paragraph clearly relates to
paper’s central idea.
May list ideas or arrange them
randomly rather than using any
evident logical structure. May use
transitions, but they are likely to be
sequential (first, second, third) rather
than logic-based. While each
paragraph may relate to central idea,
logic is not always clear. Paragraphs
have topic sentences but may be
overly general, and arrangement of
sentences within paragraphs may
lack coherence.
May have random organization,
lacking internal paragraph coherence
and using few or inappropriate
transitions. Paragraphs may lack
topic sentences or main ideas, or
may be too general or too specific to
be effective. Paragraphs may not all
relate to paper’s thesis.
No appreciable organization; lacks
transitions and coherence.
Support Uses evidence appropriately and
effectively, providing sufficient
evidence and explanation to
convince.
Begins to offer reasons to support its
points, perhaps using varied kinds of
evidence. Begins to interpret the
evidence and explain connections
between evidence and main ideas. Its
examples bear some relevance.
Often uses generalizations to support
its points. May use examples, but
they may be obvious or not relevant.
Often depends on unsupported
opinion or personal experience, or
assumes that evidence speaks for
itself and needs no application to the
point being discussed. Often has
lapses in logic.
Depends on cliches or
overgeneralizations for support, or
offers little evidence of any kind.
May be personal narrative rather
than essay, or summary rather than
analysis.
Uses irrelevant details or lacks
supporting evidence entirely. May be
unduly brief.
Style Chooses words for their precise
meaning and uses an appropriate
level of specificity. Sentence style
fits paper’s audience and purpose.
Sentences are varied, yet clearly
structured and carefully focused, not
long and rambling.
Generally uses words accurately and
effectively, but may sometimes be
too general. Sentences generally
clear, well structured, and focused,
though some may be awkward or
ineffective.
Uses relatively vague and general
words, may use some inappropriate
language. Sentence structure
generally correct, but sentences may
be wordy, unfocused, repetitive, or
confusing.
May be too vague and abstract, or
very personal and specific. Usually
contains several awkward or
ungrammatical sentences; sentence
structure is simple or monotonous.
Usually contains many awkward
sentences, misuses words, employs
inappropriate language.
Mechanics Almost entirely free of spelling,
punctuation, and grammatical errors.
May contain a few errors, which may
annoy the reader but not impede
understanding.
Usually contains several mechanical
errors, which may temporarily
confuse the reader but not impede
the overall understanding.
Usually contains either many
mechanical errors or a few important
errors that block the reader’s
understanding and ability to see
connections between thoughts.
Usually contains so many
mechanical errors that it is
impossible for the reader to follow
the thinking from sentence to
sentence.
Example of a Grading Rubric For a Term Paper in Any Discipline
ECON 2213
1. The Past and the Present
GDP
Between 1960 and 2010, China’s GDP rose almost by a factor of 100, from US$61 billion to US$5878 billion; India’s GDP rose almost 50 times, from US$36 billion to US$1729 billion.
To compare, U.S. GDP was US$521 billion in 1960 and US$14582 billion in 2010, so it rose by a factor of 28.
China GDP (current US$) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 61377930682.001297 50100934915.6492 46464003927.021667 50280424169.113762 58613239132.705734 69709152023.43071 75879433528.31572 72057026115.933792 69993499400.152954 78718820945.876007 91506213646.125854 98562021764.402344 112159815863.88483 136769881126.33055 142254740054.45526 161162497663.8302 151627679386.65732 172349008332.74481 148178859490.82288 176634786270.69693 189399992473.92038 194111112580.30768 203183214981.86008 228455947879.68686 257432147241.18619 306666660698.09283 297831879941.52753 270372194996.88678 309522625241.61945 343973680226.2486 356936901183.93323 379468656246.25134 422660918111.41339 440500898964.59888 559224707280.73083 728007199936.41199 856084729312.25269 952652693079.13672 1019458585326.1494 1083277930359.8772 1198480321713.001 1324804848409.4324 1453827687613.0815 1640959264366.2905 1931643872027.8376 2256902969137.083 2712950560614.042 3494055865921.7876 4521826899540.6836 4991256222547.583 5878629246676.5098 India GDP (current US$) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 36603837769.004601 26399913691.42857 26502288725.333332 30400103492.26667 35473701819.733154 58832423351.532974 45301428571.428581 49510666666.666664 52432000000 57730666666.6 66664 61193733626.187683 66268349145.602226 71128338762.214798 85246069939.043945 98763348780.979263 97000863806.507355 101087162350.32025 119727922849.356 135377490366.73273 150855202222.90829 183798614271.98688 190454155191.06186 197660873163.66644 215169245647.96906 209669767676.59775 229940579816.75372 246369598221.9718 276003794598.09656 293149975486.30347 292917377411.52728 317466616135.72021 267523504823.54541 245553170107.80188 276037365895.64844 323506143586.01965 356298991324.31281 388343910827.91803 410915167039.7796 416252442323.14246 450476199267.52771 460182031503.09521 477848859030.56915 507189954396.39801 599461389810.14832 721573248762.03198 834035801005.13892 951339358745.92639 1242426253335.1328 1213782569748.8347 1380640843779.0476 1729010242153.78
GNI per capita
China’s Gross National Income per capita rose from $250 in 1980 to $7570 in 2010 (a 30-fold increase).
India’s GNI per capita rose from $430 in 1980 to $3560 in 2010 (an 8-fold increase).
U.S. GNI per capita was $12,130 in 1980 and $47,020 in 2010 (a 4-fold increase).
China GNI per capita, PPP (current international $) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 250 280 320 370 440 500 550 620 700 750 800 890 1020 1170 1340 1480 1640 1820 1960 2120 2340 2560 2830 3180 3590 4130 4790 5610 6250 6860 7570 India GNI per capita, PPP (current international $) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 430 480 520 570 600 630 660 690 770 830 890 910 960 1010 1080 1170 1260 1310 1390 1490 1550 1650 1710 1870 2050 2280 2540 2840 3000 3260 3560
GDP growth
China’s annual GDP growth was over 10% on average between 2000 and 2010.
Over the same period, India’s annual GDP growth was 7.4%, but almost 9% in the 2005-2010 period.
U.S. GDP growth averaged less than 2% during 2000-2010.
China GDP growth (annual %) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -27.101881759483952 -6.1053386690719345 10.342012535239766 15.836957771216746 16.36354083253261 10.7 -5.6999999999999886 -4.1000000000000085 16.899999999999999 19.399999999999999 7 3.8 7.8999999999999915 2.2999999999999998 8.7000000000000011 -1.6000000000000085 7.6000000000000085 11.7 7.6000000000000085 7.8000000000000105 5.2 9.1000000000000014 10.9 15.2 13.5 8.8000000000000167 11.6 11.3 4.0999999999999943 3.8 9.2000000000000011 14.2 14 13.1 10.9 10 9.3000000000000007 7.8000000000000105 7.6000000000000085 8.4000000000000057 8.3000000000000007 9.1000000000000014 10 10.1 11.3 12.7 14.2 9.6000000000000085 9.1995153198393798 10.300011996535787 India GDP growth (annual %) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3.8676192736437227 3.1312714894585127 6.2780152063837846 7.4368323071244724 21.619579677213281 -3.5726096706682135E-2 7.8318824481122515 3.3734335390596328 6.5392580782128924 5.1545553255604384 1.6312544958116462 -0.54910347346951904 3.3187423713119273 1.1847160884741044 9.1473401617367962 1.6553548793819099 7.2587708085587845 5.7086532443707814 -5.2375860990493663 6.7437790706599294 5.9993298444980514 3.4655762348082533 7.2992911298127163 3.8232260524411856 5.2341588068358735 4.7682376982711094 3.9574194140738559 9.6373874313342611 5.9507372735771185 5.5289887553034145 1.0636283667741755 5.4802685133452824 4.7676267253038924 6.6541496921139327 7.5692540112010525 7.5572116305633301 4.054498470247168 6.1935404720940985 7.3873113604055698 4.030409290817019 5.2168945836677807 3.7668312545339839 8.3708968425003523 8.2781738091036488 9.3189242272783872 9.2718322241495628 9.8170036772774694 4.9323753686649781 9.1049295233417649 9.7191043425597314
China GDP growth (annual %) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 8.4000000000000057 8.3000000000000007 9.1000000000000014 10 10.1 11.3 12.7 14.2 9.6000000000000085 9.1995153198393798 10.300011996535787 India GDP growth (annual %) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 4.030409290817019 5.2168945836677807 3.7668312545339839 8.3708968425003523 8.2781738091036488 9.3189242272783872 9.2718322241495628 9.8170036772774694 4.9323753686649781 9.1049295233417649 9.7191043425597314
Population
The Chinese population stood at 1.34 billion in 2010. India’s population that year was 1.17 billion.
The U.S. population is a little over 300 million.
China Population, total 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 667070000 660330000 665770000 682335000 698355000 715185000 735400000 754550000 774510000 796025000 818315000 841105000 862030000 881940000 900350000 916395000 930685000 943455000 956165000 969005000 981235000 993885000 1008630000 1023310000 1036825000 1051040000 1066790000 1084035000 1101630000 1118650000 1135185000 1150780000 1164970000 1178440000 1191835000 1204855000 1217550000 1230075000 1241935000 1252735000 1262645000 1271850000 1280400000 1288400000 1296075000 1303720000 1311020000 1317885000 1324655000 1331460000 1338300000 India Population, total 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 434849000 444470443.19999993 454584939.19999999 465132643.20000011 476060851.19999999 487324000 498883667.20000005 510708571.19999993 522774571.19999999 535064667.20000005 547569000 560267504 573129907.19999993 586219814.39999986 599642665.5999999 613459000 627632414.4000001 642133646.39999998 656 940574.4000001 672020870.39999998 687332000 702821222.4000001 718425590.4000001 734071950.39999998 749676942.4000001 765147000 781893000 798680000 815590000 832535000 849515000 866530000 882821000 899329000 915697000 932180000 948758852.89054894 965428183.11484802 982182462.14134943 999016010.49747896 1015923000 1032473426.104 1048640720.5863014 1064398611.55152 1079721193.9453721 1094583000 1109811147.4504001 1124786997.0970898 1139964931.6418796 1155347678.02895 1170938000
Exports
As a share of GDP:
China’s exports rose from 2.6% in 1970 to 26.7% in 2009.
India’s exports rose from 3.8% in 1970 to 19.6% in 2009.
U.S. exports were 5.8% in 1970 and 11.2% in 2009.
In dollar terms (constant 2000 US$):
China’s exports were $37 billion in 1978 and $1143 billion in 2009.
India’s exports were $9 billion in 1978 and $191 billion in 2009.
U.S. exports were $266 billion in 1978 and $1371 billion in 2009.
China Exports of goods and services (% of GDP) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2.6096588470318607 2.7606982398394182 3.1847413197743801 4.3306318256788501 4.9755811281160369 4.5910184486180015 4.8144244042571387 4.6939637647238914 6.6035060828673684 8.5181411327107419 10.647835658587422 12.575271832467127 11.670255341769725 10.191023790836439 10.411287124482325 9.2129349619176608 9.9996011192109577 14.487806336909438 14.833164446108 13.902807903367806 16.073989494976495 17.365861112185332 18.64780893397479 19.649676130843989 21.266406589631885 20.225074698830007 20.053855558189891 21.753888025883736 20.346598967886553 20.169893051122447 23.326300810715029 22.600247452254738 25.133331213406191 29.55607902840293 33.951733365401054 37.081248571354038 39.133813030478137 38.413982245985203 34.979512377191362 26.743764445371049 India Exports of goods and services (% of GDP) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3.8292719842591167 3.7114068210730369 4.0757634042242099 4.2602517010899019 4.8899599622574055 5.7135393785397746 6.7646637502617084 6.4593953072103982 6.3885571647915516 6.8273914289222706 6.2110476714590384 6.0045080647521996 6.0520572179274046 5.9055666674157745 6.3570133350449956 5.3143994597092385 5.2548155112827466 5.667284224880575 6.1039123173572341 7.0966035383568054 7.1336530764153165 8.5919517846313926 8.9440346748765229 9.9499309890795207 10.003012510780072 10.969254404843722 10.507196705103739 10.817675708734788 11.1512169662043 11.664596177834976 13.2295175696875 12.75836437099151 14.485523073168755 14.804323353376017 17.551336141501029 19. 284763512918786 21.273352971535619 20.434094479693531 23.480879865969658 19.584627122713229
China Exports of goods and services (constant 2000 US$) 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 37483446253.388412 45402373136.470963 48484731492.424995 55933495306.53257 53631255745.860451 51944708106.723106 57695919962.68808 58458640543.798065 53544674490.088188 59966550340.73877 62667188141.924164 60638410235.306587 63643793584.998672 70423208646.344498 79162928313.462219 89349330656.171967 115054908662.46513 125282390746.51497 141136228085.91827 173493766001.60748 185920347573.75003 211722624000.00009 279561125000 307717547790.33917 394055369046.09131 502927680225.89423 640361797880.81799 791815397290.09973 980958860607.69727 1175502251734.7449 1274390218701.4167 1142811944482.46 India Exports of goods and services (constant 2000 US$) 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 9750374422.6494942 10837995325.989882 11405548021.911797 11312387977.800333 11993451212.90666 11883784656.124928 12750941862.842318 11945740607.791309 12594695284.004847 14197635945.913486 15258801205.659159 17086727896.429296 18984072387.059132 20818330342.963055 21836985679 .667576 24845919434.501553 28086848833.166569 36904944464.865326 39226257602.847282 38312972607.297966 43632365902.741661 51486074184.596954 60879862710.246826 64329723858.326927 78359807394.80687 82923518973.21019 106252648174.94514 133736941851.18742 162885648920.66031 171306303532.27441 204444075862.34708 190832168954.02698
Life expectancy
China’s life expectancy rose from 46.6 years in 1960 to 73.3 years in 2009.
India’s life expectancy rose from 42.2 years in 1960 to 64.1 years in 2009.
U.S. life expectancy was 69.8 years in 1960 and 78.7 years in 2009.
China Life expectancy at birth, total (years) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 46.602512195122259 47.791658536585622 49.214951219512194 50.873658536585381 52.719634146341477 54.656975609756095 56.560804878048778 58.311463414633671 59.818146341463404 61.040414634146344 61.974243902439035 62.661024390243895 63.194073170731762 63.654829268292112 64.075780487804138 64.475951219512183 64.855414634146342 65.196780487804858 65.490634146341492 65.745000000000005 65.968390243902434 66.166731707317069 66.348487804878019 66.521170731707329 66.695804878048719 66.880439024390256 67.081219512195 133 67.29819512195121 67.532926829268291 67.786390243902446 68.059073170731025 68.350390243902453 68.6552439024385 68.969585365853675 69.290341463414649 69.617536585365897 69.951634146341462 70.291731707317126 70.634804878048783 70.974902439024348 71.304000000000016 71.611585365853657 71.893146341463378 72.14717073170732 72.373682926828565 72.576658536584361 72.763609756097566 72.943073170731708 73.124560975609768 73.311048780487809 India Life expectancy at birth, total (years) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 42.426219512195132 43.058487804878055 43.697682926829522 44.343292682926837 44.993878048780488 45.644439024390245 46.291000000000011 46.931073170731715 47.565609756097544 48.194585365853655 48.827902439024392 49.478439024390248 50.151658536585373 50.845536585365856 51.551682926829272 52.254170731707305 52.9326829268295 53.568853658536597 54.148804878048793 54.66709756097562 55.124268292682935 55.527292682926863 55.892560975609761 56.234926829268296 56.560780487804884 56.872487804878055 57.169365853658547 57.447878048780474 57.710487804878056 57.962219512195162 58.21117073170732 58.467951219512194 58.736243902439163 59.021658536585413 59.324243902439029 59.643512195122113 59.974439024390144 60.309414634146194 60.641365853658314 60.967268292682924 61.284634146341446 61.592439024390252 61.892707317073182 62.188024390243896 62.481878048780494 62.777341463414274 63.080439024390245 63.393707317073186 63.717658536585368 64.052 268292682385
Poverty
In 1981, 84% of China’s population lived on less than $1.25 per day; by 2005, the ratio dropped to 15.9%.
In 1978, 65.8% of India’s population lived on less than $1.25 per day; by 2005, the ratio dropped to 41.6%.
If we use the benchmark of $2 per day, China’s ratio was 36.3% in 2005, while India’s was 75.6%.
http://iresearch.worldbank.org/PovcalNet/povDuplic.html
Energy
China’s energy use rose from 391,708 kt of oil equivalent in 1971 to 2,116,427 kt of oil equivalent in 2008.
India’s energy use rose from 156,223 kt of oil equivalent in 1971 to 620,973 kt of oil equivalent in 2008.
The U.S. comparison: 1,587,470 kt of oil equivalent in 1971, 2,283,722 in 2008.
China Energy use (kt of oil equivalent) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 391708 411998 427304 438349 484043 500505 545032 590532 600328 598488 594037 612563 636975 675653 692004 716608 753408 794192 810701 862956 856739 885789 937316 980275 1046704 1084172 1086569 1084589 1084699 1093934 1090003 1179390 1342766 1563421 1694694 1851400 1962439 2116427 India Energy use (kt of oil equivalent) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 156223 159868 164225 171109 177443 184754 189884 193250 202096 207520 218522 22705 3 234540 244561 257116 266092 276708 291561 305587 318898 331801 345055 352717 366037 386374 399194 415036 424779 450403 459453 466090 478974 490892 518614 536856 563727 595105 620973
Governance
The World Bank’s World Governance Indicators include 6 dimensions of governance.
One dimension, voice and accountability, “captures perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.”
China’s voice and accountability measure in 2009 was in the 6th percentile (bottom 6% of all countries in the world). India’s voice and accountability measure in 2009 was in the 60th percentile (top 40% of all countries in the world).
China’s regions
China has 22 provinces, 5 autonomous regions, 4 municipalities, and 2 special administrative regions.
The provinces range in population from Guangdong (104 million) to Tibet (3 million).
http://en.wikipedia.org/wiki/List_of_People%27s_Republic_of_China_administrative_divisions_by_population
India’s regions
India is divided into 28 states and 7 union territories.
The states range in population from Uttar Pradesh (200 million) to Sikkim (608,000).
http://en.wikipedia.org/wiki/List_of_states_and_union_territories_of_India_by_population
Geography of China
China’s area of 9,596,961 sq km puts it #4 in the world, about the size of the United States.
The climate ranges from sub-arctic in the north to tropical in the south.
The terrain consists of plains, deltas, and hills in the east, with mountains, high plateaus, and deserts in west.
China contains several mountain ranges, including the Himalayas (and Mount Everest).
The longest river in China is the Yangtze; the Yellow River is second.
Geography of India
India’s area of 3,287,263 sq km makes it the 7th largest country in the world in terms of area.
The climate is temperate in the north and tropical in the south.
The terrain varies from upland plains in the south, flat to rolling plains along the Ganges, deserts in the west, and mountains in the north.
The Ganges is the longest river originating in India.
The monsoon season runs from June to September, and determines agricultural production.
China’s history: Key dates
1434
1839
1898
1937
1949
1978
China’s history: Dynasties
Various parts of China were ruled by dynasties starting with the Xia Dynasty in 2100 BC.
The Qin Dynasty, led by Qin Shi Huang (where we get the word “China”), was the first to unify the country in 221 BC.
The Ming Dynasty (1368-1644 AD), in its earlier years, favoured trade and foreign exploration. This dynasty also focused on repairing and extending the Great Wall.
China’s history: Opium
The Qing or Manchu Dynasty (1644-1911) was the last imperial dynasty.
In the late 1700s, the British were paying for imports of tea with silver, since imports of British goods into China were tightly controlled.
To prevent the outflow of silver, Britain began to export opium (grown in India) to China in the early 1800s. Britain’s trade deficit quickly turned to a surplus.
The Qing government objected to the outflow of silver and, in 1839, confiscated and destroyed 20,000 chests containing over 1 million kg of opium.
China’s history: Opium wars
This led to the First Opium War of 1840-1842 between China and Britain.
China was out-matched in gunpowder and the British eventually occupied Hong Kong, Canton (Guangdong), and Shanghai.
China was forced to sign the Treaty of Nanjing, which opened China to trade in opium and other goods, and ceded Hong Kong Island to Britain.
A Second Opium War in 1856-1860 was fought over similar issues, but with the French brought in on the British side.
China’s history: “A century of humiliation”
This history—having its ports forcibly opened to foreign trade—continues to have an impact on China’s mindset and policies today.
Despite its economic size and growth, China still seems to think of itself as the underdog in world affairs.
China’s history: Reforms
The Hundred Days’ Reform was undertaken in 1898 but was unsuccessful, leading to the overthrow of the emperor.
An uprising of the Chinese Revolutionary Alliance in 1911 led to the collapse of Qing Dynasty a few months later.
Power transferred to the new Republic of China, with Sun Yat-sen as the first president.
However, the country remained fragmented and unstable.
China’s history: Civil unrest
In 1931, Japan invaded Manchuria in northern China, and invaded the mainland in 1937.
Sun Yat-sen’s protégé Chiang Kai-shek battled the new Communist party for control, while the Japanese occupied much of the country until 1945.
By 1949, Chiang retreated to Taiwan and Mao Zedong’s Communist party had achieved control of most of the country.
China’s history: Great Leap Forward
The People’s Republic of China was founded on October 1, 1949.
Like India, China initially closed itself off from the world and focused on industrialization, despite its comparative advantage in labour-intensive goods.
The “Great Leap Forward” of 1958-1961 focused on moving the country’s resources into heavy industry.
The resulting drop in agricultural production led to widespread famine and up to 45 million deaths due to starvation.
China’s history: Cultural Revolution
Criticism of Mao due to the Great Leap Forward increased the influence of more moderate party members such as Deng Xiaoping.
To preserve his power, Mao instituted the Cultural Revolution in 1966, which lasted for 10 years. To remove capitalist influences, millions of people were persecuted, tortured, or killed.
Schools and universities were closed for much of this time.
China’s history: Post-Mao
Mao Zedong died in 1976 and by 1978 Deng Xiaoping had achieved power and begun agricultural reforms.
The Tiananmen Square protests of 1989 were a nonviolent movement in favour of reform, but were brutally put down.
China’s history: Post-Mao
China regained sovereignty over Hong Kong in 1997 and Macau (formerly a Portuguese colony) in 1999.
China joined the WTO in 2001.
India’s history: Key dates
1498
1617
1757
1858
1947
1991
India’s history: Mughal Empire
Parts of India were ruled by regional powers throughout its history, including the “classical period” from the 3rd century BC until about 1300.
Invasions from central Asia gave rise to the Muslim Mughal Empire, which controlled the area of modern-day Afghanistan, Pakistan, India, and Bangladesh.
India’s history: Mughal Empire
In 1498, Vasco da Gama discovered a sea route from Europe to India, and the Portuguese started to trade, followed by the Dutch, the British, and the French.
The Mughal Empire declined after the early 18th century, with the Maratha Empire and other independent states vying for power.
India’s history: British East India Company
In 1617, the British East India Company was given permission by the Mughal Emperor to trade, with duty-free trade starting in 1717.
The ruler of Bengal objected to the use of the duty-free permits, but was defeated by the army of the East India Company in 1757.
India’s history: Crown rule
Over the next century, the British East India Company took over the administration of more and more of India, monopolizing trade and introducing a land-tax system.
The Indian Rebellion of 1857 started as a mutiny of Indian soldiers in the British East India Company’s army, and was quickly followed by other mutinies and civilian rebellions.
The British overcame the rebellion, and power was transferred from the last Mughal Emperor to the British Crown to rule India as a colony.
British Crown rule lasted from 1858 to 1947.
India’s history: Princely states
Not all of India was governed by Britain. Much of the country (the “princely states” or “native states”) was controlled by rulers.
There were 680 native states at the time of independence, most quite small.
India’s history: Independence
The British used “divide and rule” as their means of subduing the Indian population, particularly through encouraging division between the Muslim and Hindu parts of India.
In the early 20th century, the Indian (and Pakistan) independence movement began, with both militant and peaceful factions.
The Indian National Congress adopted Gandhi’s policy of nonviolent resistance, which was ultimately successful.
India history: Post-independence
India became an independent country in 1947; the Muslim-dominated part of British-ruled India became the nation of Pakistan (part of which later splintered into Bangladesh).
India’s political leaders reacted to independence by emphasizing a strong role of the state in running the economy.
Import substitution policies (high trade barriers and licences for imports) were intended to promote the growth of Indian heavy manufacturing, rather than promoting labour-intensive goods.
A balance-of-payments crisis in 1991 led to IMF requirements that India liberalize and reform its economy; India joined the WTO in 1995.
Maddison, Angus, “The West and the Rest in the World Economy: 1000–2030,” World Economics 9:4 (2008), 75-100.
Two outstanding puzzles
Puzzle #1: Why didn’t the Industrial Revolution start in China, rather than in Europe?
Puzzle #2: What are the long-term consequences of colonial rule?
Lin, Justin Yifu, “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China,” Economic Development and Cultural Change 43:2 (1995), 269-292.
From Mokyr (The Lever of Riches, 1990)
Iyer, Lakshmi, “Direct versus Indirect Colonial Rule in India: Long-Term Consequences,” Review of Economics and Statistics 92:4 (2010), 693-713.
ECON 2213
2. Reform, Liberalization, and Economic Growth
China’s economy 1949-1978:
“Big Push” industrialization
Before 1949, China had a traditional household-based economy.
After the PRC was established, China’s leaders resolved to develop an industrial economy by using a high degree of socialist planning.
China’s presidents
1949-1959 Mao Zedong
1959-1968 Liu Shaoqi
1968-1975 Song Qingling and Song Biwu
1975-1976 Zhu De
1976-1978 Song Qingling
1978-1981 Ye Jianying
1981 Song Qingling
1981-1983 Ye Jianying
1983-1988 Li Xiannian
1988-1993 Yang Shangkun
1993-2003 Jiang Zemin
2003-2013 Hu Jintao
2013-: Xi Jinping
China’s premiers
1949-1976 Zhou Enlai
1976-1980 Hua Guofeng
1980-1987 Zhao Ziyang
1987-1998 Li Peng
1998-2003 Zhu Rongji
2003-2013 Wen Jiabao
2013-: Li Keqiang
The president is the head of state; the premier is the head of government.
China’s economy 1949-1978:
“Big Push” industrialization
Priority was given to investment over consumption.
By 1954, investment was 26% of GDP.
Even today, the world average is 19%.
This was almost entirely government investment in the construction of new factories, especially heavy industry.
China’s economy 1949-1978:
“Big Push” industrialization
Between 1952 and 1978:
industrial output grew by 11.5% per year on average
the share of industry in GDP rose from 18% to 44%
the share of agriculture in GDP fell from 51% to 28%
The Big Push did jump-start the economy—but other strategies might have worked too.
China’s economy 1949-1978:
“Big Push” industrialization
China focused on the industries at the top and middle of the value chain: natural resource extraction and materials (top), refining and machinery (middle).
Hong Kong and Taiwan focused on the industries toward the bottom of the value chain: final products for consumers and firms, such as textiles, toys, and food products. They later moved up the value chain and had even faster growth than China.
China’s economy 1949-1978: Command economy
Key feature: no role for prices in resource allocation.
The government owned all large factories; in rural areas, agricultural collectives owned the land and organized the farm economy.
Factory product prices were kept high and farm prices were kept low (with procurement quotas), so relative prices were set to push resources into industrialization.
To keep workers in agriculture, there were restrictions on mobility through the hukou system, the household registration system providing residency permits and access to schooling and health care.
China’s economy 1949-1978: Command economy
No need for a modern tax system: state-owned industrial enterprises were very profitable, adding to government revenues.
Material balance planning was used to run the economy.
Nomenklatura system (Communist party controls on employment decisions) used to manage employees.
Compared to the Soviet Union, the economy was less controlled, with more decisions made at the local government level—but political ideology was more controlled.
China’s economy 1949-1978:
Policy instability
China’s economy 1949-1978:
Policy instability
1949-52: Recovery
1953-57: First five-year plan
1958-60: Great Leap Forward
Communes established in countryside; all monetary incentives rejected
Leaders reduced the resources available for agriculture, but increased the required procurement of grain
The result was the largest famine of the 20th century, with 25-45 million excess deaths
China’s economy 1949-1978:
Policy instability
1961-63: Readjustment
1964-66: Third Front
1966-69: Cultural Revolution
Groups of students (“Red Guards”) encouraged by Mao to overthrow the Communist Party leadership
1969-71: New Leap Forward
1971-76: Retrenchment
1976-78: Leap Outward
China’s economy 1949-1978: Legacy
Consequences:
Dissatisfaction with standard socialist system
Periods of experimentation showed possibilities
Mao as a scapegoat
Neglect of consumption and services
1952-78: investment grew 10.4% per year on average, while per-capita consumption grew 2.3%
Services declined from 29% of GDP to 24% of GDP
No competition in consumer markets, little quality improvement, few new products
Luxury goods like wristwatches and electric fans were inaccessible to average households
China’s economy 1949-1978: Legacy
Other shortcomings:
Underemployment and slow job creation due to emphasis on capital-intensive industry
Overambitious industrialization strategy, inefficiency of industrial products
But: high human capital
Life expectancy rose
2/3 of the population was literate by 1982, where literacy is defined as recognizing 1500-2000 characters
India’s economy 1947-1981:
slow growth
India’s economy 1947-1981:
Nehru’s objective
Jawaharlal Nehru was prime minister from 1947 to 1964. His goal was for India to be independent.
Nehru wrote: “The objective…was the attainment…of national self-sufficiency. International trade was certainly not excluded but we were anxious not to be drawn into the whirlpool of economic imperialism…To base our national economy on export markets might lead to conflicts with other nations and to sudden upsets when those markets were closed to us.”
Nehru referred to economic independence as the key objective of his advocacy of heavy industry.
India’s prime ministers
1947-1964 Jawaharlal Nehru
1964 Gulzari Lal Nanda
1964-1966 Lal Bahadur Shastri
1966 Gulzari Lal Nanda
1966-1977 Indira Gandhi
1977-1979 Morarji Desai
1979-1980 Choudhary Charan Singh
1980-1984 Indira Gandhi
1984-1989 Rajiv Gandhi
1989-1990 Vishwanath Pratap Singh
1990-1991 Chandra Shekhar
1991-1996 P.V. Narasimha Rao
1996 Atal Bihari Vajpayee
1996-1997 H. D. Deve Gowda
1997-1998 Inder Kumar Gujral
1998-2004 Atal Bihari Vajpayee
2004-present Manmohan Singh
India’s economy 1947-1981:
Industrial policy
India’s industrial policy had three key elements: a dominant role of the public sector, regulation of the private sector through licensing, and price controls.
A large role for the public sector was necessary because India wanted to keep out foreign investors, and the private sector had too few resources to take a larger role.
Because of the need for licences and permits, India’s economic policies were known as the “Licence Raj.”
India’s economy 1947-1981:
Industrial policy
At first, only industries with larger factories (more than 50 workers) were subject to licensing, but all industries came to be included. Licensing meant that firms could not expand capacity, change the goods produced, move location, or increase production without permission.
As the economy grew more complex into the 1960s, the licensing system grew more chaotic and corrupt.
Price controls were instituted to control inflation and grew in importance in the 1960s. Price controls were imposed on goods from iron and steel, nonferrous metals, coal, and fertilizers, to cotton textiles, paper, sugar, cars, bicycles, tires and tubes, soap, and matches.
India’s economy 1947-1981:
Agricultural policy
Agriculture had a low priority at first, with little role for price incentives. Nehru stated that he did not want to “encourage acquisitiveness beyond a certain measure.”
The zamindars (revenue-collecting landlords) were eliminated in the first round of reforms, but there was slow progress on land redistribution, and slow growth in agricultural output.
India’s economy 1947-1981:
Growth 1951-1965
Growth in GDP was 4.1% on average between 1951 and 1965, due to rising investment rates (from 9.7% of GDP in 1954-55 to 14.1% in 1964-65) and to expansionary fiscal policy (that would prove unsustainable).
From 1965 to 1981, growth was much slower. Between 1965 and 1975, GDP grew by only 2.6% on average; since population grew by 2.3%, this meant a virtual standstill in the standard of living.
A per-capita growth rate of 0-1% has been called the “Hindu” rate of growth.
India’s economy 1947-1981:
Growth 1951-1965
India’s economy 1947-1981:
Political context
Nehru was prime minister from independence until his death in 1964. In 1966, his daughter Indira Gandhi became prime minister and (except for 1977-80) ruled until her assassination in 1984.
With stagnation caused by the droughts of 1971-73 and inflation caused by the 1973 oil price shock, the heavily-controlled economy could not adjust. Mrs Gandhi was found guilty of fraud in the 1971 election but declared a state of emergency rather than step down.
She called an election in 1977 and lost power, but three years of a failed coalition led to her re-election in 1980.
After her assassination in 1984, her son Rajiv became prime minister until 1989.
India’s economy 1947-1981: 1960s
Trade deficits, droughts, and war with Pakistan led to a crisis in 1965, and India was forced to devalue its currency and liberalize its trading regime. Both were politically unpopular and the liberalization was short-lived.
The government then imposed further controls on industry, tighter restrictions on foreign investment, and tighter licensing restrictions, and introduced a policy reserving certain products for small-scale industry (including clothing, shoes, leather products, and other goods that a labour-abundant country would have a comparative advantage in producing and exporting).
India’s economy 1947-1981: 1960s
Labour-market regulations were introduced that made it almost impossible for larger firms (more than 100 employees) to fire workers.
Detrimental to productivity
Drove entrepreneurs towards capital-intensive industries and capital-intensive technology
In 1969, larger banks were nationalized. This caused more branches to be opened in rural areas, but could this have been done at a lower cost?
The Green Revolution (the use of high-yielding dwarf varieties of seed from Mexico) was the most positive development of the 1960s. This was controversial, but India was self-sufficient in food by the late 1970s.
India’s economy 1947-1981:
Growth 1965-1981
Whether due to poor economic policy or adverse external shocks, India did experience slower growth in the 1965-81 period compared to the 1951-65 period.
But growth should have been much faster.
During 1965-75, the world economy grew rapidly, including the GDPs of developing countries in Latin America, Africa, and Asia.
By keeping itself closed off from the world economy, India missed out on this growth.
India’s economy 1947-1981:
Growth 1965-1981
Reform in China after 1978
By now, China has spent a longer period building a market economy than it spent under a command economy. However, the transition is not yet complete.
The first phase of reform (“reform without losers”) was gradual and began to develop a market economy alongside the command economy.
The second phase was more thorough.
Reform in China after 1978
The reform process in China was very different from transition in Eastern Europe and the former Soviet Union.
There was no “big bang” in China, whereas in Eastern Europe, the goal was to move as quickly as possible to a market system, despite the short-run costs.
In China, the focus was always on economic development. Areas of unregulated activity (special economic zones [SEZs] or township and village enterprises [TVEs]) were allowed to operate since they would help lead to growth.
Gradually the balance between the planned economy and the market economy began to shift.
Reform in China after 1978
The reforms started in the countryside in 1978, with farmers in Anhui province taking over land to use privately. The government called this the “household responsibility system,” in which farmers were responsible for sending a certain amount of grain to the government but could retain their extra output.
The result was increasing production. Lin (1992) shows that agricultural output grew at an annual average rate of 7.1% during 1979-1984, compared to 2.7% during 1970-1978.
The reforms in the industrial sector followed a similar path, with enterprises given residual control over production.
Reform in China after 1978
Characteristics of the early phase of reform:
Dual-track system: coexistence of a traditional plan and a market channel.
A commitment to growing out of the plan over time, i.e., keeping the traditional plan constant and allowing the market channel to grow. This meant that both farms and enterprises faced market prices at the margin.
Government monopoly over industry was relaxed and new entrants were allowed.
Gradual loosening of price controls.
Reform in China after 1978
Continued characteristics of the early phase of reform:
Managerial reforms, not privatization; new emphasis on profitability and autonomy even in state-owned enterprises (SOEs).
Rise of SEZs, TVEs, and other areas of detachment from planned economy.
Experiments to attract FDI started in Guangdong province in 1979.
TVEs produced 26% of GDP by 1996.
Saving done by households rather than government.
Reform in China after 1978
Industrial output grew at an annual rate of 9.3% between 1978 and 1993.
Most groups benefited from reform; workers in SOEs were protected.
In 1989, anger over rising inflation (over 25%), corruption, and possibly unfulfilled expectations of more rapid political and economic change led to weeks of demonstrations in Tiananmen Square in Beijing. After a political struggle behind the scenes, conservative leaders ordered the military to clear the square. Hundreds were killed and reform slowed for a couple of years.
Deng Xiaoping’s 1992 “Southern Tour” got reform back on track. “Development is the only hard truth. It doesn’t matter if policies are labeled socialist or capitalist, so long as they foster development.”
Reform in China after 1978
The second phase of reform started in 1993 and is ongoing.
Characteristics include:
Market reunification: no longer a dual track.
Fiscal reforms and the introduction of a tax system to boost government revenue.
Macroeconomic austerity to reduce inflation.
Restructuring of the banking system.
Foreign trade reforms, including WTO membership.
Reform in China after 1978
Outcomes of the second phase:
Downsizing of SOEs: the number of workers who are employed in state-owned firms has dropped by 40% since the mid-1990s.
Privatization (“restructuring”).
Reform with losers, e.g. SOE workers.
Continuing reforms:
Financial system: dominated by state-owned banks with weak budget constraints.
Corporate governance.
Regulatory agencies.
An increase in inequality and poverty, with pensions and health insurance lagging behind.
Kotwal, Ashok, Bharat Ramaswami, and Wilima Wadhwa, “Economic Liberalization and Indian Economic Growth: What’s the Evidence?,” Journal of Economic Literature 49:4 (2011), 1152-1199.
Problems with data
Measuring output
Production measured at current prices vs. constant prices.
Comparing countries using exchange rates vs. purchasing power parity.
Data quality
It is unusual for economists to even acknowledge that data are not always trustworthy.
The Penn World Table used to give grades for data quality.
Maddison, Angus and Harry X. Wu, “Measuring China’s Economic Performance,” World Economics 9:2 (2008), 13-44.
China GDP per capita (constant 2000 US$) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 186.43966067109992 193.63815602551051 208.1708634913125 227.54964013833305 258.72023073512929 289.67596824884265 310.51434704025263 341.02129351122699 373.4945008173674 382.89215532989766 391.65295288702902 421.88917481776178 475.92886966147222 536.35726471441535 599.80228054973838 657.99260019026849 716.24511661325948 774.88463403743253 827.34859801700986 882.55232179207894 949.17806208299191 1020.5199935033831 1105.9525569567111 1208.993960974934 1323.219928685796 1464.1076270031251 1640.8615182850172 1864.1027022203878 2032.6149802993341 2208.4039475036752 2426.3324663395492 2634.7116580038692 India GDP per capita (constant 2000 US$) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 230.00853550107806 238.23056652032702 240.90967865289818 252.65169429879768 256.45343997227485 263.96052053051028 270.51327739447589 275.15138774904108 295.19699680955586 306.17172884337066 316.42857787568084 313.27451323097063 323.85750144891563 332.60568485181665 347.95103504034216 367.27716252565409 387.74152141543215 396.18443877339939 413.28705191508669 440.56930932129654 450.41510612385292 464.97426070759929 475.45705812449984 505.24893628575546 536.60487996218365 577.65673483909552 621.89943990989764 673.00462621505767 689.27320443546432 735.6318487873616 794.80121108556204 837.74641803311818 United States GDP per capita (constant 2000 US$) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 22630.520148183088 22978.984705646271 22310.239368523406 23105.520726635696 24554.402883613555 25338.555640389201 25965.883424048501 26549.876021724365 27388.618022092083 28098.400723355753 28298.446951236972 27849.880842461829 28401.465175897421 28834.559347582919 29655.069410443954 30050.986733064768 30827.988196486305 31831.461594185323 32847.351969028146 34053.355408429612 35081.923084361377 35116.215078994443 35427.909964491482 36021.314082149212 36931.39382546665 37718.005366579324 38349.398788591454 38710.885441536884 38208.761183378185 36539.228231680005 37329.615913867594 37691.027330766578
China GDP per capita, PPP (constant 2005 international $) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 523.9502538933956 544.18014197095351 585.02132210964976 639.48138123978163 727.07990399191988 814.0746264205344 872.6365966536116 958.37008432165305 1049.6293429554642 1076.0395147511001 1100.6599312861044 1185.6326034115484 1337.500031896272 1507.3215860462565 1685.6207313865207 1849.1526357037051 2012.8593312634948 2177.6536134027569 2325.0927749438551 2480.2314669136617 2667.4693830072824 2867.9611825868928 3108.0518003825318 3397.6284366118884 3718.6369847281785 4114.5728335605054 4611.3032281580854 5238.6765809166618 5712.2456196384073 6206.2642939206544 6818.7074959928459 7404.3142815106366 India GDP per capita, PPP (constant 2005 international $) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 879.40451701131644 910.84026873932362 921.08346821811983 965.97737433045654 980.51280150711352 1009.215043091741 1034.2685654425352 1052.0017125508098 1128.6432124658288 1170.603520167024 1209.8191055785294 1197.7599935570452 1238.2225251846851 1271.6699447919298 1330 .3406816909451 1404.2313473999084 1482.4738769921551 1514.7541558312621 1580.143534606844 1684.4533174808537 1722.0973038784928 1777.762135085389 1817.8416016115059 1931.7465580870762 2051.6314938531732 2208.5873499991367 2377.7429624171737 2573.1362837195993 2635.3368500647239 2812.5824516540983 3038.8079887210697 3203.0028038890805 United States GDP per capita, PPP (constant 2005 international $) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 25509.516998569699 25902.312325137493 25148.490917881056 26044.94593484807 27678.151171419486 28562.061834871638 29269.196653521172 29927.483294743139 30872.927905635621 31673.007345463709 31898.502942437131 31392.871401409597 32014.626881963628 32502.818185665539 33427.711438626371 33873.996349679655 34749.845950540846 35880.978665502815 37026.108013659403 38385.536123853184 39544.955546896126 39583.610081315674 39934.957992361953 40603.853463048974 41629.711221960184 42516.393469999275 43228.111147106982 43635.585206814234 43069.58 1985720804 41187.655325080705 42078.594105197226 42485.983357520781
Bosworth, Barry and Susan M. Collins, “Accounting for Growth: Comparing China and India,” Journal of Economic Perspectives 22:1 (2008), 45-66.
Eichengreen, Barry, Donghyun Park, and Kwanho Shin, “When Fast-Growing Economies Slow Down: International Evidence and Implications for China,” Asian Economic Papers 11:1 (2012), 42-87.
ECON 2213
3. Demography and Missing Women
Demographic transition
The term “demographic transition” refers to the transition from high to low fertility rates (birth rates) and from high to low mortality rates (death rates).
In a pre-industrial society, fertility rates are high since many children are needed to work in agriculture and there is no family planning; death rates are high because of disease, famine, and poor knowledge of medicine.
Demographic transition
As medical knowledge and sanitation improve, the death rate falls, both for older people and for children.
Over time, the birth rate also falls; since child mortality is lower, fewer children are needed in order to ensure a proper number of farm workers.
In a modern industrial society, the birth rate and death rate are both low. The birth rate is low because of family planning, later marriage, and the improved status of women; the death rate is low because of improved health, improved medical care, and a reliable food supply.
Demographic transition
The rate of population growth increases in the middle of the demographic transition, and then falls at the end of the transition.
The number of workers in the labour force also grows, with a lag.
During the demographic transition, there is a change in the age structure of the population: the ratio of the economically-active (i.e., working-age) population to the total population will first fall (as more children and elderly survive), then rise (as the birth rate falls), then fall.
There may therefore be a transitional effect on growth.
Demographic transition
The transition in Europe and other now-industrial countries occurred during the 19th century. By now, in some countries, the birth rate has fallen below the death rate.
The transition in Asia did not start until the mid-20th century but it has been a faster transition process than in Europe, as Asia has been able to import health practices (e.g., sanitation) and health technologies (e.g., penicillin).
Germany Birth rate, crude (per 1,000 people) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 17.3 17.899999999999999 17.8 18.100000000000001 18 17.399999999999999 17.2 16.5 15.7 14.7 13.4 12.9 11.5 10.3 10.200000000000001 9.9 10.200000000000001 10.3 10.4 10.5 11.1 11 11 10.6 10.4 10.5 10.9 11.2 11.4 11.2 11.4 10.4 10 9.8000000000000007 9.5 9.4 9.7000000000000011 9.9 9.6 9.4 9.3000000000000007 8.9 8.7000000000000011 8.6 8.6 8.3000000000000007 8.2000000000000011 8.3000000000000007 8.3000000000000007 8.1 Germany Death rate, crude (per 1,000 people) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 12 11.6 11.9 12 11.6 12 11.9 11.9 12.6 12.7 12.5 12.3 12.3 12.2 12.1 12.6 12.3 11.9 12.2 12.1 12. 2 12.2 12 12 11.8 12 11.9 11.6 11.5 11.5 11.6 11.4 11 11.1 10.9 10.8 10.8 10.5 10.4 10.3 10.200000000000001 10.1 10.200000000000001 10.3 9.9 10.1 10 10.1 10.3 10.4
India Birth rate, crude (per 1,000 people) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 41.267000000000003 40.946999999999996 40.644000000000005 40.361000000000004 40.099000000000011 39.846999999999994 39.591000000000001 39.315999999999995 39.015000000000001 38.689 38.349000000000004 38.010999999999996 37.692000000000213 37.4 37.134 36.887999999999998 36.645000000000003 36.388999999999996 36.106000000000002 35.791000000000011 35.446999999999996 33.9 33.800000000000004 33.700000000000003 33.9 32.9 32.6 32.200000000000003 31.5 30.6 30.2 29.5 29.2 28.7 28.7 28.3 27.5 27.2 26.5 26.1 25.8 25.4 25 24.8 24.1 23.8 23.5 23.1 22.8 22.5 India Death rate, crude (per 1,000 people) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 21.228000000000002 20.658999999999999 20.099 19.547999999999988 19.010000000000005 18.485999999999841 17.978000000000002 17.484000000000002 17.003 16.535 16.077999999999999 15.627999999999998 15.183 14.745999999999999 14.319000000000004 13.91 13.524000000000001 13.169 12.848000000000001 12.56 12.306000000000004 12.5 11.9 11.9 12.6 11.8 11.1 10.9 11 10.3 9.7000000000000011 9.8000000000000007 10.1 9.3000000000000007 9.3000000000000007 9 8.9 8.9 9 8.7000000000000011 8.5 8.4 8.1 8 7.5 7.6 7.5 7.4 7.4 7.4
China Birth rate, crude (per 1,000 people) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 198 9 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20.86 18.02 37.01 43.37 39.14 37.879999999999995 35.050000000000004 33.96 35.590000000000003 34.11 33.43 30.650000000000031 29.77 27.93 24.82 23.01 19.91 18.93 18.25 17.82 18.21 20.91 22.279999999999987 20.190000000000001 19.899999999999999 21.04 22.43 23.330000000000005 22.37 21.58 21.06 19.68 18.27 18.09 17.7 17.12 16.979999999999986 16.57 15.639999999999999 14.639999999999999 14.03 13.38 12.860000000000024 12.41 12.29 12.4 12.09 12.1 12.139999999999999 12.129999999999999 China Death rate, crude (per 1,000 people) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 25.43 14.239999999999998 10.02 10.040000000000001 11.5 9.5 8.83 8.43 8.2100000000000009 8.0300000000000011 7.6 7.3199999999999985 7.6099999999999985 7.04 7.34 7.3199999999999985 7.25 6.87 6.25 6.21 6.34 6.3599999999999985 6.6 6.9 6.8199999999999985 6.78 6.8599999999999985 6.72 6.64 6.54 6.67 6.7 6.64 6.64 6.49 6.57 6.56 6.51 6.5 6.46 6.45 6.4300000000000024 6.41 6.4 6.42 6.51 6.81 6.9300000000000024 7.06 7.08
Demographic transition
Government intervention also plays a role, as with the one-child policy in China.
The one-child policy, introduced in 1978, restricts couples to having only one child.
Exceptions:
Rural residents, if the first child is a girl.
Ethnic minorities.
Parents who are only children.
The rationale for the policy was to reduce the birth rate. It is controversial due to reportedly draconian enforcement measures, such as infanticide and forced abortion. It is possible for parents to pay fines upon the birth of a second child; the fines vary by province.
“It is forbidden to discriminate against, mistreat or abandon baby girls.”
Bloom, David E. and Jeffrey G. Williamson, “Demographic Transitions and Economic Miracles in Emerging Asia,” World Bank Economic Review 12:3 (1998), 419-455.
Bloom and Williamson (1998)
Sen, Amartya, “More than 100 Million Women are Missing,” New York Review of Books 37:20 (1990).
The fall in the birth rate in China and India has not been experienced equally between boys and girls; rather, the birth rate has fallen more for girls.
If parents want to have fewer children (either due to economic reasons or to government pressure), they often would prefer to have a boy rather than a girl.
The availability of ultrasound technology has made sex-selective abortion more common (even though it is illegal in both China and India).
The result is a higher ratio at birth of boys to girls than would be found in nature.
Sen (1990)
Worldwide, the ratio of boys to girls at birth is 1.06, that is, around 106 boys for every 100 girls.
According to the UN, in 2005, the ratio was:
117 in China
108.5 in India
Boys per 100 girls Azerbaijan China Armenia Bosnia and Herzegovina India Montenegro Suriname Serbia Singapore 118.62396204033216 116.95906432748538 114.41647597254004 110.37527593818903 108.45986984815617 108.45986984815617 108.22510822510822 107.29613733905578 107.06638115631634
Sen (1990)
How can we estimate the number of missing women?
Differences in the ratio of men to women are the result of differences in the ratio at birth and differences in mortality rates. With unbiased health conditions and equal nutrition, male mortality rates are higher at every age.
In a stationary population, the ratio should be close to 1, although it will be different for countries with different age structures.
Sen (1990)
Even if the sex ratio at birth is unbiased, there could be higher female than male child mortality if girls are not given the same nutrition or health care as boys.
Sen estimates that 100 million women are missing; these estimates are based on ratios of men to women that exist in Europe and North America (1.05 women per man).
Coale (1991) uses a ratio based on past fertility and mortality, and comes up with a lower number of 60 million.
Das Gupta, Monica, Jiang Zhenghua, Li Bohua, Xie Zhenming, Woojin Chung and Bae Hwa-Ok, “Why is Son Preference So Persistent in East and South Asia?,” Journal of Development Studies 40:2 (2003), 153-187.
Qian, Nancy, “Missing Women and the Price of Tea in China,” Quarterly Journal of Economics 123:3 (2008), 1251-1285.
Edlund, Lena, Hongbin Li, Junjian Yi and Junsen Zhang, “Sex Ratios and Crime: Evidence from China,” mimeo (2012) (forthcoming in Review of Economics and Statistics).
Jensen, Robert and Emily Oster, “The Power of TV: Cable Television and Women’s Status in India,” Quarterly Journal of Economics 124:3 (2009), 1057-1094.
Caste
Caste refers to a system of social stratification based on heredity.
In India, caste has historically determined an individual’s occupation, but since Independence, the Indian government has attempted to lessen the effects of the caste system.
The Indian constitution forbids discrimination based on caste.
A certain percentage of political offices is reserved for the lowest castes (“Scheduled” castes).
Beaman, Lori, Esther Duflo, Rohini Pande, and Petia Topalova, “Female Leadership Raises Aspirations and Educational Attainment for Girls: A Policy Experiment in India,” Science 335:6068 (2012), 582-586.
ECON 2213
4. Poverty and Inequality
Measuring poverty
To measure poverty, we first need to decide on a poverty line, such that those below it are considered poor. We can use an absolute poverty line (e.g., the World Bank’s $1 or $2 per day poverty line) or a relative poverty line (e.g., half of median income).
The most common way to measure poverty is to use the poverty rate or headcount ratio: this is the share of the population below the poverty line.
Measuring poverty
The poverty rate is simple and easy to understand, but has weaknesses.
First, the poverty rate does not indicate the depth or intensity of poverty, i.e., how far below the poverty line poor people are.
Second, the poverty rate does not change if people below the poverty line become poorer.
These weaknesses are addressed with the poverty gap. This adds up the extent to which individuals on average fall below the poverty line and expresses it as a percentage of the poverty line.
Measuring poverty
The squared poverty gap (or poverty severity index) takes into account inequality among the poor. This is a weighted sum of poverty gaps, where the weights are the poverty gaps themselves (e.g., a poverty gap of 10% of the poverty line gets a weight of 10%, a poverty gap of 50% of the poverty line gets a weight of 50%, etc.), thereby putting more weight on individuals who are far below the poverty line.
Measuring poverty
In Canada, we measure poverty based on a person’s or household’s income. In low-income countries, it may be better to measure poverty based on consumption, as consumption may be more accurately measured, and many workers may receive in-kind income (e.g., food).
Other measures of well-being can be used, such as the Human Development Index, education, life expectancy, infant mortality, or Sen’s “capabilities” approach.
Measuring inequality
The Gini coefficient or Gini index is the most common measure of inequality. The Gini coefficient is a number between 0 (perfect equality) and 1 (perfect inequality).
A Gini is based on a Lorenz curve, which shows how much of a country’s income is received by various percentages of the population; Gini is the ratio of the area between the line of complete equality and the Lorenz curve to the area of the triangle between the line of complete equality and the axes.
The formula for the Gini index is:
Measuring inequality
Other ways to measure inequality include the range (top earner minus bottom earner), the ratio (top earner divided by bottom earner), the coefficient of variation (standard deviation divided by mean), and the Theil index, which is one of a set of generalized entropy measures.
The Theil index has a strong advantage over the Gini, as it is decomposable into between-group and within-group inequality.
The formula for the Theil T index is:
Measuring inequality
Inequality can be measured:
Within a household.
Between households.
Within a village.
Between villages.
Within rural areas or urban areas.
Between rural areas and urban areas.
Within a state/province.
Between states/provinces.
Within a country.
Between countries.
Measuring inequality
In 1955, Kuznets made a prediction that, as countries develop, inequality will first rise and then fall. This has become known as the Kuznets curve.
Worldwide poverty trends (PovCalNet): $1.25/day
Worldwide poverty trends (PovCalNet): $1.25/day
Worldwide poverty trends (PovCalNet): $2.50/day
Worldwide poverty trends (PovCalNet): $2.50/day
Poverty trends in China and India
Using the $1.25/day measure, between 1981 and 2009:
Rural China: The headcount fell from 94% to 21%, and the poverty gap fell from 47% to 5%.
Urban China: The headcount fell from 44% to 0.6%, and the poverty gap fell from 9% to 0.2%.
Poverty trends in China and India
Using the $1.25/day measure, between 1978 and 2009:
Rural India: The headcount fell from 69% to 34%, and the poverty gap fell from 25% to 8%.
Urban India: The headcount fell from 55% to 29%, and the poverty gap fell from 19% to 7%.
Worldwide inequality trends
Sala-i-Martin (2002) estimates that the worldwide Gini fell from 0.657 in 1970 to 0.633 in 1998, and that the worldwide Theil fell from 0.835 in 1970 to 0.776 in 1998.
Inequality trends in China and India
UN-WIDER (World Institute for Development Economics Research) have put together estimates of the Gini for China and India.
Rural China: The Gini was 0.29 in 1978, 0.25 in 1981, 0.30 in 1985, 0.33 in 1991, and 0.33 in 2003.
Urban China: The Gini was 0.17 in 1981, 0.21 in 1995, 0.25 in 2000, and 0.33 in 2003.
Rural India: The Gini was 0.34 in 1951, 0.33 in 1961, 0.29 in 1970, 0.30 in 1983, 0.30 in 1992.
Urban India: The Gini was 0.40 in 1951, 0.36 in 1961, 0.35 in 1970, 0.34 in 1983, 0.36 in 1992.
Notice that rural inequality is higher in China, but urban inequality is higher in India.
Growth and poverty
Growth in per-capita GDP can lead to reduced poverty if such growth is neutral or biased towards the poor; if growth is biased towards the rich (e.g., by raising the returns to high-skilled workers), then growth may actually increase poverty.
World Bank studies show that growth has tended to be pro-poor, but that inequality shows no relationship to growth.
Banerjee, Abhijit and Esther Duflo, “The Economic Lives of the Poor,” Journal of Economic Perspectives 21:1 (2007), 141-168.
Banerjee and Duflo (2007)
How do the poor spend their money?
How do the poor earn their money?
Banerjee and Duflo (2007)
Banerjee and Duflo (2007)
Banerjee and Duflo (2007)
How do markets affect the poor?
How does infrastructure affect the poor?
Ravallion, Martin, “A Comparative Perspective on Poverty Reduction in Brazil, China, and India,” World Bank Research Observer 26:1 (2010), 71-104.
Milanovic, Branko, “Half a World: Regional Inequality in Five Great Federations,” Journal of the Asia Pacific Economy, 10:4 (2005), 408-445.
Kanbur, Ravi and Xiaobo Zhang, “Fifty Years of Regional Inequality in China: A Journey through Revolution, Reform and Openness,” Review of Development Economics 9:1 (2005), 87–106.
Kanbur and Zhang (2005)
Theil T:
Theil L:
The Theil T index is more sensitive to changes in the upper tail of the distribution; the Theil L is more sensitive to changes in the lower tail.
Hypothesis 1: “Decentralization affects regional inequality during the economic transition from a planned economy to a market economy.”
Hypothesis 2: “The heavy-industry development strategy was a major contributing factor to the large rural-urban divide and to overall inequality.”
Hypothesis 3: “Greater openness is associated with greater regional inequality in a spatially large country such as China.”
Kanbur and Zhang (2005)
Topalova, Petia, “India: Is the Rising Tide Lifting All Boats?,” IMF Working Paper WP/08/54 (2008).
