Testing the neoclassical theory of economic growth: Evidence from Chinese provinces

There has been renewed empirical work recently on testing the neoclassical model of economic growth using data on various groups of countries. But non e of the cross-country regressions includes China, the largest developing e conomy in the world. This study utilises both cross-sectional and panel dat a on provinces of China over the reform period 1978-1995 to examine the ext ent to which the growth process in this country can be explained by the aug mented Solow-Swan model. We found that in spite of restrictive assumptions used, the model provides a fairly good description of cross-sectional data. The levels and growth rates of GDP per capita are shown to be higher in re gional economies with lower population growth, greater openness to foreign countries and more investment in physical and human capital. In addition, r egional economies are shown to converge both conditionally and unconditiona lly over the reform period. However, the quantitative implications of the a ugmented Solow-Swan model are not borne out in panel data. JEL classificati on: 040, C21, C23.