Accounting for Economic Growth in Taiwan and Mainland China : A Comparative Analysis

Aggregate economic growth is studied using Cobb-Douglas production functions. For Taiwan, new capital stock and human capital data are constructed. We find a constant labor exponent of about 0.7, assuming constant returns; a constant rate of increase in total factor productivity (TFP) of about 0.03 from 1951 to 1999; and a smaller exponential rate of growth of real GDP of about 0.065 since 1987 than the 1951 to 1999 average of 0.081, mainly due to a slower growth of the labor input. For mainland China, we find a constant labor exponent of about 0.35 from 1952 to 1998, a rate of TFP increase of about 0.027 beginning only after 1979, and a more stable increase in the labor input than in Taiwan resulting in a smaller reduction in future growth rate