Class 01

China Reading Notes 01: Friday 11 September

Introduction to class

Syllabus: online (http://econ274.academic.wlu.edu). key is (i) multiple papers, (ii) rewrite option on one paper, (iii) final exam on last set of readings, can convert to a final paper by class concensus

Themes: overall resembles an applied development economics course

= heterogeneity of China: origins as a geographically diverse, US-continental-sized multiethnic, mutlilingual empire, and not as a centralized nation-state. lots of ramifications for today that will become apparent as the term progresses, in the relative strength of Beijing versus provinces and so on.

= growth process: Solow model and two sector Lewis-Fei-Ranis model

= incentives, using agriculture as an example. how important are institutions?

= agriculture versus industry (it would be nice to cover services, as they are in fact the core of all middle- and high-income economies, but limited data, limited class time)

= migration and urbanization

= conclude with Wallace book that pulls together agricultural, migration and the urban side in a political economy framework

Initial example: reading on hypergamy (“marrying up”)

= preface: a graph (from IMF Article IV review of 2015) of slowing growth from 2000. 

› whatever the headlines, this is not “news”!!

› Rule of 70/72: divide growth rate in percent into those. at 10% growth China’s economy was doubling every 7 years, or 2x2x2x2 = 16-fold since reforms began to have an effect in the early 1980s. at the current 6% it will double in 12 years. over the last 6 quarters US growth averaged 2.4%, that’s 29 years to double. China is still on track to be the largest economy in the world and not (as at present) first among equals.

= as opposed to homogamy, which is a strong norm in most societies

› homgamy remains the main realized pattern of actual marriage. after all, most women and men do marry, so only a portion can marry up.

› Western literature (think Cinderella and Dalton Abbey) has lots of stories that revolve around hypergamy

= implications for marriage: later marriage, more “old maids” still single at the age of 30, and (eventually) more unmarried men

› older men tend to have higher incomes, so a preference for older men is in part hypergamy, in part risk aversion: wait until a man has a track record!

› the article notes an impact on real estate markets

› what is the decision unit? the (extended) family, not the individual or nuclear family as young men surely do not often have the wherewithal to buy a house!

= implications for economy: delayed marriage and no marriage lower fertility and hence population growth

› while it is far from the only factor, indeed may be a minor factor, China’s population growth has been well below replacement (more on that later this term!) for 30+ years

› we now have the grandchildren of the first smaller post-baby-boom generation starting to enter the labor force, in numbers fewer than their now-retiring grandparents

∑ China’s working age population is shrinking! 

Hence the slowing growth: we have one (partial!) explanation