Development Strategy, Structure Of Property Rights And Long Economic Growth

This paper aims to build a coherent theoretical framework in explaining China’s long economic growth since1840. We believe that traditional idea is difficult to explain long economic growth from1840because of ignoring the dynamic evolution of economic and institutional environment, as a result, the current essays are impossible to solve the questions such as "Why was the economic growth from1840to1949intolerable? Who finished the task of industrialization if the efficiency of State-Owned enterprises(SOEs) is low? As the’Catching-up’ strategy is reasonable, what was the reason that leads the efficiency of ’Catching-up’ strategy from high to low, and finally the’Comparative advantage’ strategy were introduced?"To answer these problems, this paper first proves the dynamic efficiency of SOEs(include micro and macro efficiency), and then tries to give a convincing explanation to fully understand long economic growth since1840, we find that:(1) After the reform of property rights, the performance of SOEs is highly improved, and the gap between SOEs and NSOEs is unclear. Apart from it, we discuss the relationship between the level of market the different enterprise’s performance, we find that when the level of the market is low, the gap of the two goes up as the level of market increases. However, as the evolution of the market, the gap goes nearer when the level of market climbs up.(2) SOE’s low efficiency is under the premise of the market high efficiency. By introducing the model that extends Yang and Ng(1995),we find that:as the trading efficiency isn’t high which indicates the cost of "Production Risk"(PR) is the main efficiency loss, so the efficiency of SOE is better and then promotes the economic growth. By contrast, the "Transaction Risk"(TR) occupies the main efficiency loss, and then the private enterprise is better and finally gives high imputes on the economy.(3) Owing to discrimination on NSOEs and financial restraint, the model that extends Yang(1999) is introduced to prove the idea that only the high efficiency of the markets can we have the positive relationship among financial deepening, privation and economic growth. When the failure of market exists, the cost of production risk occupies the main loss of the efficiency, and the arrangement of financial restraint and state enterprise can promote the economic growth.(4) The economic growth since1840is a inseparable part that cannot be divided, what’s more, we agree the idea that the intolerable economic growth from1840to1949can be attributed by unreasonable development strategy, the low efficiency of the property structure and the government’s opportunism, in addition, the limited economic growth from1949to1978is due to Catching-up strategy, SOEs and the government’s effective subsidy. Finally, the economic miracle since1978can be explained by Comparative advantage strategy, NSOEs and the disinterested government.(5) When facing the middle-income trap, we proved the nonlinear relationship between intellectual property rights and long economic growth in terms of the varies of residual claimant rights. The conclusion is that:when the trading efficiency is low, the production of investment goods is far from the world’s technical frontier, so the fuzzy intellectual property protection that is convenience to imitation can realize the reasonable economic growth. However, as the trading efficiency and the level of market varies, the production of imitation will satisfy the principle of diminishing marginal returns due to the weakening role of technical diffusion. As a result, the lowering economic growth and middle-income trap are inevitable if there is no change.In all, by investigating the long economic growth in terms of development strategy, property structure and optimal choice of government, we find that both development strategy and property structure show the characteristic of dynamic and periodically reasonable, that is to say, it’s unwise of us to discuss development strategy and low efficiency of SOEs. Therefore, only indentifying specific economic environment in different period can we step over the middle-income trap, and then make the sustainable economic growth finally.