Two essays on economic development and growth of developing countries
Student thesis: Doctoral Thesis
Related Research Unit(s)
This dissertation is composed of two essays, each focusing on one particular issue related to the economic development and growth of developing countries. The first essay investigates the role of intellectual property rights (IPR) protection plays in economic development and long-run growth of developing countries from a global perspective. By taking horizontal foreign direct investment (FDI) as the technology transfer channel and the development of human capital in the South into consideration, this study generates non-monotonic spillover effect of horizontal FDI on the productivity of the host nation, which is consistent with recent empirical findings. Moreover, the model also indicates that the effects of strengthening IPR protection in the South on FDI, global economic growth, and North-South wage gap are all dependent on the current protection level. When the IPR regime is weak, an enhancement will raise both FDI rate and economic growth rate, and will narrow the North-South wage gap. By contrast, when the IPR protection regime is sufficiently strong, a further enhancement will reduce both FDI rate and economic growth rate, and will widen the North-South wage gap. These findings suggest the existence of an optimal level of IPR protection in the South in terms of long-run growth, at which level the long-run global economic growth embracing both the developed and the developing countries will be maximized. The second essay aims to account for the growth of the Chinese economy in the post-reform era of 1978–2010 and to quantify the contribution of various potential sources of growth. The conventional growth accounting at the sectoral level reveals that (1) the TVE sector thrived and led the economic growth in 1978–1988, whereas its role was replaced by the urban non-state sector in the subsequent two decades, (2) the TFP growth rates at the sectoral level varied over time, which were particularly high in the TVE sector and urban non-state sector in 1978–1999, and in the state sector in 2000–2010, (3) for most of the time, the TFP level in the urban non-state sector was higher than those in the TVE sector and the state sector, (4) the urban non-state sector expanded whereas the TVE sector and state sector shrank in later stages, and (5) the non-agricultural sector as a whole became increasingly reliant on capital accumulation over time. These results imply substantial gains from sector level TFP growth, resource reallocation, and the rising rates of investment. We adopt the model-based growth accounting approach proposed by Brandt and Zhu (2010), and quantify the contributions from potential sources through counterfactual analysis. The results show that (1) in 1978–1999, it was the TFP growth in the TVE sector that played the most important role in driving the GDP growth at the aggregate level, whereas its role was replaced by the TFP growth in the urban non-state sector in 2000–2010, (2) growth in sectoral TFPs was the most important factor in fueling economic growth, whereas the increase in the rate of investment played the secondary role, (3) reallocation gains from the urbanization process and the SOE reform were non-negligible, but moderate, and (4) if the capital market distortions could be removed, then even higher growth rate in the aggregate level could be achieved.
- Economic development.