Accounting For Growth Comparing China and India

Journal of Economic Perspectives—Volume 22, Number 1—Winter 2008 —Pages 45– 66
Accounting for Growth: Comparing

China and India
Barry Bosworth and Susan M. Collins
T hrough most of the twentieth century, only those in the high-income

industrial countries, less than one-fifth of the world’s population, have
enjoyed the fruits of economic well-being. However, since 1980, China and
India have achieved remarkable rates of economic growth and poverty reduction—
and taken together, these countries comprise over a third of the world’s popula-
tion. The emergence of China and India as major forces in the global economy has
been one of the most significant economic developments of the past quarter
century.
This paper examines sources of economic growth in the two countries, com-
paring and contrasting their experiences over the past 25 years. In many respects,
China and India seem similar. Both are large geographically and have enormous
populations that remain very poor. In 1980, both had extremely low per capita
incomes. The World Bank and the Penn World Tables show GDP per capita for
India was roughly equal to the World Bank’s 1980 average for all low-income
countries, while per capita GDP for China was about two-thirds of the estimate for
y Barry Bosworth is Senior Fellow and holds the Robert V. Roosa Chair, Brookings Institu-
tion, Washington, D.C. Susan M. Collins is the Joan and Sanford Weill Dean of Public
Policy, Gerald R. Ford School of Public Policy, University of Michigan, Ann Arbor, Michigan.
This paper was written when Collins was Professor of Economics, Georgetown University, and
a Senior Fellow, Brookings Institution, both in Washington, D.C. Their e-mail addresses are
具bbosworth@brookings.edu典 and 具smcol@umich.edu典.
46 Journal of Economic Perspectives
India.1 Since 1980, both countries have sustained impressively rapid growth. As
shown in Figure 1, GDP per capita has more than doubled in India and increased
a remarkable seven-fold in China.
However, many details of their economic growth experiences are in fact quite
different. In this paper, we investigate patterns of economic growth for China and
India by constructing growth accounts that uncover the supply-side sources of
output change for each economy. Some of the results confirm themes that have
emerged from the prior literature on the economic development of the two
countries. For example, China stands out for the explosive growth in its industrial
sector, which in turn was fueled by China’s willingness to act more quickly and
aggressively to lower its trade barriers and to attract foreign direct investment
inflows. In contrast, India’s growth has been fueled primarily by rapid expansion of
service-producing industries, not the more traditional development path that
begins with an emphasis on low-wage manufacturing.
However, some new findings emerge as well. The decompositions of aggregate
output growth enable us to compare experiences in these countries to one another
as well as to experiences of other economies. In addition, we construct separate
accounts for the three major economic sectors: 1) agriculture (which also includes
forestry and fisheries); 2) industry (manufacturing, mining, construction, and
utilities); and 3) services. (In the literature, these sectors are often referred to as
primary, secondary, and tertiary, but we will stick to these more descriptive terms in
this paper.) This level of detail enables us to highlight key differences in the
development paths taken by China and India. It also enables us to assess the
efficiency gains associated with the movement of workers out of agriculture, where
they are frequently under-employed, into higher productivity jobs in industry and
services.
Growth Accounting: An Overview
Growth accounting provides a framework for allocating changes in a country’s

observed output into the contributions from changes in its factor inputs— capital
and labor—and a residual, typically called total factor productivity. The latter is best
interpreted as a measure of gains in the efficiency with which the factor inputs are
used.
1
Some controversy exists in the literature about the relative income levels of China and India in 1980.
China has not participated in past rounds of the International Comparison Project, and measures of
GDP at purchasing power parity are quite speculative. India last participated in the International
Comparison Project in 1985. Maddison (2001) shows the two countries with nearly equal levels of
income per capita of about $1000 in 1980, but he obtained those values from a 1987 comparison of
China to the United States and used a lower rate of growth between 1980 and 1987 than indicated by
the official Chinese statistics.
Barry Bosworth and Susan M. Collins 47
Figure 1
GDP per Capita
(constant 2000 international purchasing power parity dollars)
6000
5000
China
4000
3000
2000
India
1000
0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Source: World Bank’s 2006 World Development Indicators. This purchasing power parity measure of GDP
standardizes for differences in the prices of common products across countries and over time.
This approach is based on a production function in which output is a function

of capital, labor, and a term for total factor productivity. As discussed in more detail
in Bosworth and Collins (2003), we essentially assume a Cobb-Douglas production
function with fixed factor shares:
Y ⫽ AK ␣共LH 兲 1⫺␣.
Y, A, K, and ␣ are measures of output, total factor productivity, physical capital

services, and capital’s share of income, respectively. The capital share, ␣, is assumed
equal to 0.40 for both countries. L is labor, which is adjusted for improvements in
educational attainment H as a proxy for skills; we use average years of schooling as
a proxy for skill levels and assume a constant annual return of 7 percent for each
additional year of education. We recognize that it would be preferable to rely on a
more general formulation of the production process and to use the income shares
of each factor to infer its contribution. However, the economies of developing
countries have large numbers of self-employed persons, who derive income from
both capital and their own labor, which makes it difficult to obtain meaningful
measures of income shares. We believe that the simplifying assumption of a
constant share for capital and labor has minimal effects on the overall conclusions.
With this framework, along with data on output and inputs of capital and labor, we
can then estimate total factor productivity as a residual term.
We report our results by dividing through both sides of the production
function by labor input L and by taking logarithms of both sides. As a result, we
report our results in terms of decomposing the growth in output per worker
⌬ln(Y/L) into the contributions of growth in capital per worker ⌬ln(K/L), in-
creases in education per worker ⌬ln(H), and a residual measure of the contribu-
tion of improvements in total factor productivity ⌬ln(A):
⌬ln共Y/L兲 ⫽ ␣ 关⌬ln共K/L兲兴 ⫹ 共1 ⫺ ␣兲⌬lnH ⫹ ⌬lnA.
Our actual calculation is slightly more complex, because when dividing the
economies up into sectors, we also allow for the possibility of land acting as an
additional input to production. As it turns out, however, this addition does not
make a substantial difference to our results. In the tables presented here, the
contribution from land is included with physical capital.
In interpreting the results from any growth accounting decomposition, two
important cautions should be kept in mind. First, total factor productivity is not
only a measure of technical progress. It also captures the effects of myriad other
determinants of the efficiency of factor usage: government policy, political
unrest, even weather shocks. Second, the results highlight proximate causes of
economic growth, which are often not the same as underlying fundamental
causes. For example, the decomposition might uncover that there have been
increased contributions to economic growth from both capital inputs and total
factor productivity— but this calculation alone would not enable us to infer how
much of the increase in capital may have been induced by more efficient factor
usage— or vice versa. With these cautions in mind, the approach provides useful
benchmarks for analyzing economic performance.
To construct growth accounts requires measures of each country’s outputs and
factor inputs over time. The availability and quality of data can be a problem in
studying less-developed economies. We return to a discussion of some of the key
measurement issues at the end of the paper.
What Do Aggregate Growth Accounts Show?
Table 1 reports the growth accounts for the economies of China and India over
the period 1978 to 2004. We first provide the results for the full 26-year period that
corresponds to China’s economic reform period. This time period also works fairly
well for India, which also experienced a growth acceleration in the early part of this
period, although the timing of the change in India is more controversial. We divide
the period at 1993 for three reasons: it is a benchmark year for India’s national
accounts, and the second subperiod avoids a 1991 economic crisis in India and can
be identified with India’s post-reform era.
At the bottom of Table 1, we also report similar growth accounts for the
East Asian economies excluding China (Bosworth and Collins, 2003). Their
performance is of particular interest in the present context because it has so
frequently been cited as a model for remarkable economic performance. These
Accounting for Growth: Comparing China and India 49
Table 1
Sources of Growth: China, India, and East Asia, 1978 –2004
(annual percentage rate of change)
Contribution to output per worker of
Output per Physical Total factor

Period/country Output Employment worker capital Education productivity
1978–2004 China 9.3 2.0 7.3 3.2 0.3 3.6

India 5.4 2.0 3.3 1.3 0.4 1.6
1978–1993 China 8.9 2.5 6.4 2.4 0.4 3.5
India 4.5 2.1 2.4 0.9 0.3 1.1
1993–2004 China 9.7 1.2 8.5 4.2 0.3 3.9
India 6.5 1.9 4.6 1.8 0.4 2.3
East Asia excluding China
1960–1980 7.0 3.0 4.0 2.2 0.5 1.2
1980–2003 6.1 2.4 3.7 2.2 0.5 0.9
1980–1993 7.3 2.7 4.6 2.6 0.6 1.4
1993–2003 4.5 2.0 2.5 1.8 0.5 0.3
Source: Authors’ estimates as described in text; Bosworth and Collins (2003).

Notes: The employment series is a census-comparable concept for both China and India. The East Asia
comparison includes Indonesia, South Korea, Malaysia, Phillipines, Singapore, Taiwan, and Thailand.
Growth rates may not sum due to rounding.
countries are also notable for the extent to which their growth appears to have
been the result of extremely rapid gains in both physical capital and educational
attainment.
Output, Employment, and Output per Worker

The first column of Table 1 shows each country’s output growth. China’s
annual output growth averaged a whopping 9.3 percent during the entire period.
India’s annual growth rate is substantially lower, at 5.4 percent, but still well above
the economy’s 3.4 percent growth rate in the two decades before 1978. India’s
growth also accelerated by a full 2 percentage points between the two subperiods:
1978 –93 and 1993–2004. The national accounts of each country provide our basic
source for data on output for the total economy and the three major sectors:
agriculture, manufacturing, and services. India’s national accounts data are used
without modification. However, as discussed below, we did make adjustments to the
Chinese data by using an alternative price deflator for the manufacturing sector to
address concerns that official series may overstate the rate of real growth.
As shown in the second column of Table 1, China and India experienced
nearly identical rates of employment growth over the full period. At the level of the
total economy, over a period of several decades, employment growth is largely
determined by growth in the population of labor force age. The marked slowing of
employment growth in China during the 1993–2004 period is also evident in
estimates of the population of labor force age and reflects the sharp decline in the
birth rate during the 1970s. For both countries, the employment estimates reported
here are based on the employment series that is most comparable to the concept
used in census data.2
The third column shows growth in output per worker for each country and
time period. We focus on this performance measure in much of the discussion
below— both because it provides an indicator of labor productivity and because
scaling by number of workers brings it closer to a measure of income per capita,
which is a typical indicator of living standards. Although output growth in India
accelerated considerably more between the first and second subperiods than in
China, the slowdown in China’s labor force growth meant that both countries
experienced accelerations in labor productivity growth after 1993.
India’s performance on the increase in output per worker since 1993 compares
favorably with that achieved by East Asia in its heyday—that is, prior to the financial
crisis of 1997–98. India’s strong growth is overshadowed only by the even more
remarkable performance of China. The comparison with East Asia also highlights
the extent to which China’s growth performance has exceeded prior norms. A few
other countries have achieved growth rates comparable to China’s growth for
relatively short time periods: for example, Germany and Japan in their recoveries
from World War II, and Taiwan and the Republic of Korea more recently. However,
China’s rapid growth has now lasted more than a quarter century.
Decomposing the Sources of Economic Growth

The remaining columns of Table 1 decompose increases in output per worker
into the contributions from increased physical capital per worker, education (hu-
man capital per worker), and total factor productivity (the residual measure of
efficiency). The very small contribution associated with land is included with
physical capital. In both China and India, the growth in output per worker is
2
For India, employment estimates are only available from the quinquennial household surveys, and
values for intervening years must be interpolated. Estimates of the workforce follow international
standards of including wage earners, the self-employed, and unpaid family members. As a result, they
include a substantial number of underemployed workers. We use a measure based on a worker’s primary
activity (employed, unemployed, out of the labor force) in the prior year.
For China, we use data on employment from the population censuses, which begins in 1990.
Consistent estimates for the earlier years were obtained from Holz (2006b), and we build in an
adjustment for the data break in 1990. This series is conceptually most comparable with the data for
India. However, it has also been subject to frequent revision, and little is known about the precise
methods used to compute it. An alternative source of data on employment uses administrative data from
the employment reporting system and extends back to 1952. Again, only limited information is available
on the methods used to generate these series. Also, in the years prior to 1998, the administrative data
include workers who were effectively laid off—although no official layoffs occurred (Holz, 2006b). Both
employment series are published in the China Statistical Yearbook. In the 2005 edition, the series that is
based on administrative reports is shown in table 5-6. The series that is closer to a census concept is
shown in table 5-2. If we use the alternative administrative data, they imply about the same rate of
employment growth for the full 1978 –2004 period, but a larger portion of the growth occurs before
1993. Thus, we find that the average annual growth in output per worker is reduced by about 0.4 of a
percentage point in 1978 –93 and raised by an equivalent amount over the 1993–2004 period.
equally split between increases in physical and human capital per worker on the
one hand and gains in total factor productivity on the other, although the values for
China are twice those for India. As Table 1 shows, contributions to India’s growth
from capital deepening rose somewhat during the 1993–2004 period. However, the
contribution of physical capital to India’s growth remained well below those
evident during the investment-led rapid growth experiences of the East Asia
miracle. In contrast, China achieved a rate of capital deepening comparable to that
for East Asia in the 1978 –1993 subperiod, and a substantially higher rate more
recently.
Our calculation of the sources of growth requires data on the quantities of
capital and education.3 Data on fixed capital are taken directly from each country’s
national accounts. India produces its own estimates of the capital stock by major
sector, which we adopted. Other work we have done on India includes a more
detailed discussion of the concern that low investment may be a constraint to
growth (Bosworth, Collins, and Virmani, 2007). Recent data revisions for India
show a strongly rising trend for gross private investment since 1993. However, total
net investment averaged about 17 percent of GDP during 1999 –2004, which we
estimate is unlikely to support an annual output growth rate much above 7 percent.
This data also shows declines in public sector investment as a share of GDP, which
is worrisome given concerns about India’s weak and deteriorating infrastructure.
In the case of China, information on physical capital investment from the
provincial reports must be used to allocate the national data on gross fixed capital
formation among the three major sectors (Hsueh and Li, 1999).4 We constructed
our own perpetual-inventory estimates of the capital stock assuming a geometric
rate of depreciation of 0.06.
Data on educational attainment for China, India, and a group of East Asian
comparison countries appears in Table 2. India’s gains in education are near the
East Asian average— however, India’s educational attainment started from a very
low level so that a similar percentage gain reflects a much smaller rise in actual
years of schooling. Furthermore, Indonesia, with a comparable per capita income
and initial educational level, was able to raise its average years of schooling by
considerably more. In fact, India stands out from other Asian economies for its slow
3
Our growth accounts include land as well as capital and labor as factor inputs to produce agriculture.
In neither country are there available estimates of current market value of the land that would enable
us to construct measures of the annual flow of capital services from land. Thus, we focus on the growth
in the aggregate amount of land. Over the past quarter century, aggregate agricultural land expanded
by about 9 percent for India and 3 percent for China. Using these measures, land played a minor role
in explaining aggregate growth in China and India. For India, an estimate of the volume of land used
in agricultural production is available annually. We use an estimate of total cropped land that adjusts for
irrigated lands, which are sown more than once per year. For China we used a measure of total sown land
area, available on-line from the China Data Center and included in a table entitled “Production
Condition for Agriculture of China.”
4
In addition, the expenditure-side estimates of GDP have not yet incorporated the revisions that
resulted from the last economic census and that are included in the output data. Thus, the data may be
subject to revision in the near future.
Table 2
Measures of Educational Attainment, Asia, 1960 –2000
Average years of schooling Share with no schooling (percent)
1960 1980 2000 1960 1980 2000
India 1.4 2.9 4.5 72 56 43

China 2.5 4.4 6.0 56 32 16
Indonesia 1.5 3.7 6.0 68 32 21
Korea 4.7 8.3 11.1 40 14 6
Malaysia 3.0 5.5 7.9 50 26 14
Taiwan 3.9 7.6 8.8 37 16 10
Thailand 3.5 4.2 6.8 34 14 10
Source: Barro and Lee (2000), Cohen and Soto (2001), India National Sample Survey Organization
(NSSO), and authors’ calculations.
Note: All persons aged 15 and over. The reported number is a simple average of the data in Barro and
Lee, and Cohen and Soto. Data for India in 1980 and 2000 come from the NSSO surveys conducted in
1983– 84 and 1999 –2000, respectively.
progress in reducing the share of the population with no schooling. Measures of

educational attainment for India and their contribution to labor quality are dis-
cussed more fully in Bosworth, Collins, and Virmani (2007). In addition, our own
investigation found surprisingly low returns to primary education in India and a
rising return to higher education, presumably implying an increasing shortage of
the highly educated.
In China, the process of formal education was greatly disrupted by the Cultural
Revolution of the late 1960s and early 1970s. In later years, an unusually large
number of adults took advantage of remedial programs to raise their recorded
educational levels, but the value of those programs is controversial. Young (2003)
provides a useful overview of Chinese statistics on educational attainment that
confirm the evidence of limited gains in educational attainment for the adult labor
force. In particular, his analysis of the relationship between earnings and years of
schooling finds surprisingly low returns. Knight and Shi (1996) also document a
large divide in the educational attainment of rural and urban workers in China. In
contrast to India, however, China does appear to have largely eliminated illiteracy.
For example, UNESCO reports a literacy rate of 99 percent among youth aged
15–24 in China, compared with just 76 percent for India.
To obtain the measures of human capital used in our decomposition, we
constructed indices of educational attainment. We were able to do this for each
sector of the Indian economy using information from the quinquennial household
surveys (Bosworth, Collins, and Virmani, 2007). For China, we relied on an average
of prior estimates from Barro and Lee (2001) and Cohen and Soto (2001). Since
we are unable to distinguish differential levels of education across sectors of the
economy, we use a common education index. As noted earlier, our human capital
index assumes that each additional year of schooling raises labor force productivity
by 7 percent. This figure is based on a large number of empirical studies relating

wages and years of schooling (Bosworth, Collins, and Virmani, 2007).
The final column of Table 1 shows the contribution from changes in total
factor productivity—that is, in the efficiency of factor usage. As noted earlier, gains
in total factor productivity account for fully half of the increases in output per
worker in China since 1978 and India since 1993. This feature sets both China and
India apart from the East Asian miracle of the 1970s and 1980s, which was more
heavily based on investments in physical capital. In addition, China stands out for
the sheer magnitude of its gains in total factor productivity.
What Do Sectoral Growth Accounts Show?
International organizations, such as the United Nations and World Bank, have
traditionally divided an economy into three sectors: Agriculture, the “primary
sector,” also includes forestry and fishing. Industry, the “secondary sector,” is
composed of manufacturing, construction, and utilities. The service or “tertiary
sector” covers the remainder of the economy. For industrial countries, consistent
data for sectoral-level analysis is readily available from the OECD. However, for
developing countries, the availability of sectoral data on output and employment
must be determined on an individual country basis from country sources. Table 3
reports sectoral growth accounts, again by country and time period.
Agriculture
Both China and India benefited from the Green Revolution, but improve-
ments in the Chinese agricultural sector were also aided by more fundamental
institutional reforms. China’s economic reforms have taken place in a stepwise
fashion beginning with the restoration of family farms in the late 1970s and the
movement of large numbers of workers into rural enterprises. In the late 1980s and
1990s, growth was fueled by the devolution of fiscal and administrative powers to
local governments, greater autonomy for state-owned industrial enterprises, and
the steady introduction of market incentives. Domestic and foreign-owned private
enterprises emerged as the drivers of the growth process, and China became
committed to the development of a “socialist market economy.”5
The output of China’s agricultural sector has grown at a very rapid pace,
4.6 percent per year from 1978 to 2004, compared to a strong but less-spectacular
2.5 percent growth rate in India. Although both countries exhibited a slowing in
the years after 1993, the agricultural sector continues to be a major contributor to
5
Riedel, Jin, and Gao (2007) provide a much more extensive overview of the reform process, including
more recent steps undertaken. Lin (1988) focuses on family farms and the emergence of the “household
responsibility system.”
Table 3
Sources of Growth by Major Sector, 1978 –2004
(annual percentage rate of change)
Contribution to output/worker of
Output per Physical Factor

Period/country/sector Output Employment worker capital Education productivity
Agriculture
1978–2004 China 4.6 0.3 4.3 2.3 0.3 1.7
India 2.5 1.1 1.4 0.3 0.3 0.8
1978–1993 China 5.2 0.9 4.3 2.2 0.3 1.7
India 2.7 1.4 1.3 0.1 0.2 1.0
1993–2004 China 3.7 ⫺0.6 4.3 2.3 0.2 1.7
India 2.2 0.7 1.5 0.6 0.3 0.5
Industry
1978–2004 China 10.0 3.1 7.0 2.2 0.3 4.3
India 5.9 3.4 2.5 1.5 0.3 0.6
1978–1993 China 9.3 4.4 4.9 1.5 0.4 3.0
India 5.4 3.3 2.1 1.4 0.4 0.3
1993–2004 China 11.0 1.2 9.8 3.2 0.3 6.1
India 6.7 3.6 3.1 1.7 0.3 1.1
Services
1978–2004 China 10.7 5.8 4.9 2.7 0.3 1.8
India 7.2 3.8 3.5 0.6 0.4 2.4
1978–1993 China 11.3 6.5 4.7 1.8 0.4 2.5
India 5.9 3.8 2.1 0.3 0.4 1.4
1993–2004 China 9.8 4.7 5.1 3.9 0.3 0.9
India 9.1 3.7 5.4 1.1 0.4 3.9
Source: Authors’ estimates as described in text. For China, the output data are the official series of the
national accounts for agriculture and services, and the series for industry is based on the alternative
price deflator discussed in the text.
growth of the aggregate economy.6 China’s growth in agricultural production is

particularly impressive because it occurred against the backdrop of declining
employment in this sector after 1993. At the same time, output per worker contin-
ued to expand at a very strong 4.3 percent annual rate. China achieved its gains
through both substantial increases in capital per worker and rates of total factor
productivity growth more than double those for India.7
6
Fan and Zhang (2002) use household surveys of food consumption in China to argue that the official
agriculture statistics may overstate the growth of output. We believe that the reliance on household
surveys of food consumption to challenge the official production data is itself questionable; in other
countries, household surveys are notorious for their underestimation of consumption. In addition, while
Fan and Zhang are correct to point out that Laspeyres indexes overstate growth, the reliance on such
indexes is not unique to China. Finally, any overestimate that occurs has not changed much over time,
and certainly not be enough that it would greatly alter our finding of strong productivity growth.
7
Rawski and Mead (1998) argue that the administrative employment data greatly overstate the share of
China’s workforce that is employed in agriculture and that as many as 100 million workers should be
reclassified as actually working in nonagricultural jobs. They based their estimates on information on
While growth in agricultural output per worker is not nearly as impressive in India
as it is in China, annual increases of more than 1 percent represent a significant
improvement relative to the 1960s and early 1970s, in which there were little or no
gains in agricultural productivity (Bosworth, Collins, and Virmani, 2007). What is
striking for India, however, is that employment in the agricultural sector has continued
to grow in the 1993–2004 period, albeit at a somewhat slower rate. We attribute this to
an insufficient rate of expansion of employment opportunities in industry and services
relative to India’s population growth.
Industry
The industrial sector, which includes manufacturing, as well as construction,
public utilities, and mining, differs dramatically in size between China and India. In
China, this sector has consistently accounted for about half of GDP, whereas in
India it has remained below 30 percent. During the 1978 –93 period, the sector
grew rapidly in both countries, with large increases in employment. Both also had
similar rates of gain in capital per worker. However, China experienced a much
faster rate of total factor productivity improvement.
In the period since 1993, China has achieved spectacular rates of growth in
industrial output per worker. Employment growth slowed to only a little more than
1 percent per year, while output per worker has averaged nearly 10 percent
annually. (Again, this figure is based on our use of the alternative price deflator for
this sector, discussed later in this paper.) This result has been achieved by a
doubling of growth in both the contribution of increased capital per worker and
total factor productivity. India has also witnessed an acceleration of output growth
in its industrial sector, but the magnitude has been much smaller and about half of
the growth is attributable to increased employment. The rate of gain in India’s
labor productivity has been only about one-third that for China, the contribution
of increased capital per worker has been much smaller, and India’s gains in total
factor productivity in this sector have averaged only a very modest 1 percent per year.
Services
India has attracted considerable attention for the rapid expansion of its service
industries; however, the expansion of this sector has also been very strong in China. As
shown in Table 3, China’s services sector has grown as rapidly as its industrial sector and
accounts for most of the growth in employment. Furthermore, China’s output per
worker in this sector has grown at a steady 5 percent annually over the full 26-year
period. Since 1993, China has also had an increase in the contribution of capital per
labor input requirements and acreage for various crops. We have not incorporated their adjustment in
our measures of employment by sector. We use the alternative census-based series, and it is not clear how
to adjust for workers who may be employed in both agriculture and nonagriculture. In any case, their
adjustment has the greatest effect on the relative growth of the labor input prior to the mid 1980s, when
it would sharply raise the growth of labor productivity in agriculture and lower it for the nonagricultural
sectors. However, it matters little for post-1993 growth rates.
worker in services as large as that for industry. Where China’s service sector has
performed less well is in its weak rate of improvement in total factor productivity.
Services is the sector in which India comes closest to matching China’s perfor-
mance. India’s output growth in the service sector accelerated after 1993, and the rate
of improvement in output per worker exceeds 5 percent annually. It is also remarkable
that India has achieved those gains with only a very modest contribution from
increased capital per worker. Unlike for China, India’s impressive performance in
services is largely reflected in a rapid improvement of total factor productivity. In
Bosworth, Collins, and Virmani (2007), we argue that these gains are somewhat
puzzling and may be somewhat overstated. One would only expect to see such rapid
total factor productivity gains in relatively modern service subsectors—such as finance
and business services—that are most likely able to take advantage of technological
changes in information and communication. However, these subsectors accounted for
less than one-fifth of India’s output of services in 2004. Much of India’s output growth
in services occurred in the biggest subsectors—such as wholesale and retail trade and
transportation. These and other more traditional services account for fully 60 percent
of India’s total service sector output.8
Sector Shares
The top panel of Table 4 shows the distributions of output in both China and
India measured in value-added terms in 1978, 1993, and 2004. In 1978, agriculture
and services each accounted for roughly one-quarter of China’s output, with
industrial activities accounting for the remaining half. In contrast, agriculture was
India’s largest output share in 1978, with services and industry accounting for
one-third and just one-quarter respectively. These differences have increased in
subsequent years. By 2004, the output share of agriculture had declined by 20
percent in both economies. For China, this was split equally between increases in
the industrial and service sectors. In contrast, India has seen only a small increase
in the output share of its already relatively small industrial sector, with most of the
expansion concentrated in services.
The bottom panel of Table 4 shows distributions of employment by sector. In
1978, these distributions appear quite similar for China and India; that is, both
reported about 70 percent of their workers as being in the agricultural sector. Since
then, workers have moved out of agriculture, but the decline in the share of
employment in agriculture has been much larger for China: only 47 percent are
still in agriculture, compared to 57 percent for India. In addition, China now has
a larger portion of its workforce in services than does India.
Are these sectoral distributions unusual relative to those for similar econo-
mies? A recent International Monetary Fund (IMF) study (2006) compares actual
output and employment shares in each sector with predicted shares, based on a
regression analysis that controls for country characteristics such as output per
8
Unfortunately, the data needed for a similar decomposition of China’s service sector are not available.
Table 4
Value-Added and Employment by Industry as Share of Total
(percent)
Year/country Agriculture Industry Services Total
Value added
1978
China 28 48 24 100
India 44 24 32 100
1993
China 17 51 33 100
India 33 28 39 100
2004
China 9 58 33 100
India 22 28 50 100
Employment
1978
China 71 17 12 100
India 71 13 16 100
1993
China 56 22 21 100
India 64 15 21 100
2004
China 47 23 31 100
India 57 18 25 100
Source: China Data Center and China Statistical Yearbook (National Bureau of Statistics of China); India
National Accounts; India National Sample Survey Organization.
capita, population, and geographic size. For both China and India, the study finds
that agriculture’s output share is about what one would expect. For India, the
actual output shares for industry and services are also quite similar to predicted
shares. In contrast, China’s industrial sector accounts for an unusually large share
of output, while its service sector accounts for a somewhat smaller share than
predicted. The IMF analysis also highlights that the agricultural sector continues to
employ a surprisingly large share of the labor force in both China and India, and
that this high employment in agriculture is offset by a significantly smaller-than-
predicted labor force share in the service sector.
Reallocation Effects
Output growth can be generated from the reallocation of resources into higher
productivity activities, as well as from productivity gains within sectors. Indeed, this
reallocation effect is potentially a very important source of growth for economies in
which a large share of labor is initially underutilized in agriculture. We will contrast this
dimension of the sources of growth for China and India. Our first step is to examine
sectoral differences in labor productivity. We then decompose aggregate growth in
Figure 2
Output per Worker by Sector, China and India, 1978 –2004
(international dollars of 2004)
China
25,000
20,000 Industry
International dollars
15,000
Services
10,000
5,000
Agriculture
0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
India
25,000
20,000
International dollars
15,000
Services
10,000
Industry
5,000
Agriculture
0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Source: China Data Center and China Statistical Yearbook (National Bureau of Statistics of China); India
National Accounts; India National Sample Survey Organization.
output per worker into the contributions from each sector and a residual, which can be
interpreted as the effects from resource reallocation.
Figure 2 shows the evolution of output per worker by sector from 1978 to 2004. We
use purchasing power parity exchange rates from the World Bank and constant 2004
prices to construct indicators that are comparable for the two countries. (The results
are quite similar if market exchange rates are used instead.) The figure shows that the
level of Chinese labor productivity in each sector was only about 70 percent that for
India in 1978. But by 2004, Chinese output per worker in services, agriculture, and
industry had risen to 110, 130, and 220 percent of India’s levels, respectively.
The figures also highlight the substantial and growing sectoral differences in labor
Table 5
Sectoral Growth in Output per Worker, 1978 –2004
(percentage contribution to growth)
Total Agriculture Industry Services Reallocation
1978–93
China 6.4 1.2 2.4 1.1 1.7
India 2.4 0.6 0.5 0.7 0.6
Difference 4.0 0.6 1.9 0.5 1.0
1993–04
China 8.5 0.7 5.0 1.7 1.2
India 4.6 0.5 0.9 2.1 1.2
Difference 3.9 0.2 4.1 ⫺0.4 0.0
Source: Authors calculations as explained in the text.
productivity for both economies. In 1978 for both India and China, output per worker
was nearly identical in the industrial and service sectors, and roughly three times that
for the agricultural sector. Since then, India has experienced relatively slow produc-
tivity growth in the agricultural sector, combined with an acceleration for services
beginning in the mid 1990s. By 2004, Indian labor productivity in industry and services
had risen somewhat to four and five times that for agriculture, respectively. Due to the
rapid and sustained labor productivity in industry, the productivity differences are even
larger for China. In 2004, the levels of output per worker in China were seven times
higher in the industrial sector than in agriculture and five times higher in services than
in agriculture. A recent IMF study (2006, p. 11) notes that “for the world as a whole,
labor productivity in nonagricultural sectors is about three times higher than in
agriculture.” Thus, the sectoral productivity gaps that have emerged in India and
especially China appear quite large.
How much of the aggregate economic growth in each country can be attrib-
uted to sectoral gains in output per worker? A simple measure of the contribution
from each sector is provided by the sector’s growth rate (from Table 3), weighted
by its share in total value added at the outset of each subperiod (from Table 4). The
difference between total growth and the sum of the sectoral contributions provides
a (residual) measure of the effects due to resource reallocation.
Table 5 shows the resulting decompositions by period, for each country as well as
the cross-country differences in each component. During the first subperiod, 1978 –93,
India’s growth can be attributed in roughly four equal proportions to gains in each of
the three sectors and gains from resource reallocation. In the more recent period, the
main difference has been a trebling of the contribution from services and a doubling
of the contribution from resource reallocations. As expected given the previous dis-
cussion, Chinese performance is dominated by the industrial sector, which accounts for
more than a third of aggregate growth during the first period and more than half
during the second. However, the magnitude of the reallocation in China is larger than
that for India in the first period and of equal size in the second. With a higher rate of
overall growth, the reallocation effect falls from roughly one-fourth of the total before
1993 to just 15 percent more recently. The magnitude of these reallocation effects is
comparable to those found by Bloom, Canning, Hu, Liu, Mahal, and Yip (2006) for an
earlier sample period and by the International Monetary Fund (2006).
Table 5 also highlights a striking shift in the sources of the difference in economic
growth between the two countries. During both 1978 –93 and 1993–2003, China’s
average annual growth in output per worker exceeded that for India by nearly 4 per-
cent. While strong Chinese industrial sector performance is the most important factor
in the earlier period, relatively strong growth in China’s agricultural and services
sectors and a larger reallocation effect all contributed to the overall growth differential.
In contrast, after 1993, all of the difference between China and India’s labor produc-
tivity growth rates can be explained by the much larger contribution from China’s
industrial sector. After 1993, India’s services sector shows a slightly higher rate of
growth and the reallocation effects are of equal magnitude.
Some Data Concerns

The data concerns for China and India are quite different. For example, India
has a very large informal sector, where output and employment are concentrated
in small enterprises. Thus, construction of India’s national accounts makes exten-
sive use of large periodic surveys of households, rather than relying on reports from
major enterprises. China, in contrast, can rely more heavily on reports from large
industrial sector enterprises, but must still use household surveys to obtain high-
quality information on some service-producing industries. Another difference is
that India has had a coherent statistical system for decades. China is still in the
process of converting its statistical reporting system from the old Soviet-style
Material Product System (MPS) to the commonly recognized international system
of Standard National Accounts (SNA). Yet another difference is that for India, a
larger amount of methodological information about its economic statistics is avail-
able in English, but for China we lack some important details.
In this paper, the data that we use for India is essentially the government data
on output and employment by sector, sometimes using the World Bank’s purchas-
ing power parity exchange rates to adjust over time. As a result, our growth
accounts for India accord closely with prior research. We provide a detailed
discussion of the data sources and issues for India in Bosworth, Collins, and
Virmani (2007).
For China, on the other hand, there are two especially controversial issues related
to measurement of output. Is China’s rate of economic growth systematically overstated
because its price indexes for calculating real output are too low? Is China’s rate of
economic growth slowing in recent years? We tackle these questions in turn.
Is China’s Rate of Economic Growth Overstated?

China’s real output data come from asking firms to report the change in their
production based on prices of the prior year. The difficulty of making that calcu-
lation may lead many enterprises to report equal rates of nominal and real change,
and thus to overstate real growth (Woo, 1998). This critique focuses mainly on
prices for industrial goods. The price index for consumer services is also question-
able, because the items included in that index are far from representative of the
product mix of this sector, and because changes in these prices have been domi-
nated by the elimination of a large array of subsidies and price controls for the
services provided to households, particularly with regard to housing. The most
extensive criticisms of the official output data for China are those of Maddison
(1998), who, in his estimates, reduced the growth of China’s GDP by an average of
2.4 percent per year for the 1952–95 period. Maddison’s estimates are themselves
controversial. They are severely criticized by Holz (2006a), and official estimates of
output were recently revised upward to correct for an underestimation of services
sector output during 1993–2004.
Some researchers have sought to construct alternative price indexes that could be
used to deflate the nominal values (Young, 2003; Dekle and Vandenbrouck, 2006). We
experimented with using the price indexes suggested by Young (2003). The alternative
output measure for agriculture has a very similar growth rate to that reported in the
official national account statistics. Woo’s argument that firms may confuse nominal
and real changes in output seems most applicable to the large enterprises of the
industrial sector, where the alternative price indexes do indicate substantially more
rapid inflation than the implicit price deflators embedded in the official data—
implying a significantly slower rate of output growth. Ultimately, while we computed
the growth accounts using both the official output measures and those based on the
alternative price deflators, our preferred set uses the official output data for the
agricultural and service sectors and the alternative price index only for the industrial
sector. These calculations are the ones reported in the tables of this paper.
Finally, we note that research on other countries has highlighted severe
problems in the construction of price indexes that result in an overestimate of
inflation. The two major problems are the failure to incorporate substitution effects
and inadequate allowances for quality change, which are both likely to be of
substantial importance in China. While we agree that the current estimates of
China’s output growth leave substantial room for error, the evidence for overall
significant bias seems unproven.
Is China’s Growth Slowing?

A number of studies have expressed concern about what they perceive to be a
slowing of the rate of China’s total factor productivity growth in recent years (Kuijs
and Wang, 2006; OECD, 2005; Zheng, Bigsten, and Hu, 2006). Our analysis finds
no such slowing. We believe that the differences can be traced to two factors.
First, several studies report a slowing of China’s overall output growth after 1993,
which eventually leads in the growth accounting calculation to a lower level of total
factor productivity. Our study incorporates the recent revisions in the national accounts
that raised the level and growth of output in the services sector in China. China’s
official GDP statistics report a 10 percent growth rate for both the 1978 –93 and
1993– 04 periods; but as discussed a moment ago, we used an alternative price deflator
that lowered the overall rate of growth of industrial sector output for the full post–1978
period, which has a bigger impact in reducing the estimate of growth in the early years
of the time period we consider. Thus, we show a modest acceleration of annual GDP
growth of 0.8 percentage points after 1993, compared to a 0.7 percent deceleration, for
example, in the Kuijs and Wang (2006) study.
Second, several studies use a greater elasticity of output with respect to capital
than our assumption of 0.4; for example, Kujis and Wang (2006) use a capital share
of 0.5, Zheng, Bigsten, and Hu (2006) use the three alternatives 0.4, 0.5, and 0.6,
and OECD (2005) uses 0.53.9 In the case of India, this assumption does not matter
greatly for the growth accounting decomposition because capital and labor inputs
grow at relatively similar rates. In China, however, the rate of growth of the capital
input is far in excess of that for labor, and this difference widens in the second
subperiod. Thus, a high weight assigned to the capital input will produce an index
of inputs that rises rapidly relative to output, leaving little room for improvement
in total factor productivity.
We are dubious about the frequent assumption of a capital elasticity of 0.5 or
higher in the growth accounting studies of China. Perhaps it can be traced to econo-
metric studies, such as Chow and Li (2002), that obtain large coefficients on capital in
regression estimates of an aggregate production function. However, an economy with
a high rate of growth of output and capital relative to labor can appear to have a strong
correlation between output and capital, and thus a high capital elasticity, without this
regression coefficient being indicative of the underlying production process. We
believe that the low quality of the data makes any estimate of the aggregate production
function a bit dubious. Our estimates, like those of Young (2003) and the International
Monetary Fund (2006) that use a similar capital elasticity, obtain a larger estimate of
the contribution of total factor productivity.
Future Prospects
China’s growth performance over the last 25 years has truly been extraordi-
nary, but in recent years, India has also grown at a rate that matches the other
industrializing economies of East Asia. However, some differences stand out be-
tween the two economies. India’s growth has been strongest in various service-
producing industries, while India’s manufacturing sector has remained surprisingly
weak. China’s growth is remarkably broad across agriculture, industry, and services.
Overall, the growth of services in China actually exceeds that of India. Using the
most recent data, we find no support for some of the recent arguments that China
is experiencing a significant deceleration of growth in total factor productivity due
to wasteful and excessive expansions of capital investment.
9
Heytens and Zebregs (2003) use both 0.56 and 0.63; however their study does not include the
post-1998 period in which the others find a total factor productivity slowdown.
Despite their growth performance in recent years, China and India are still
very poor countries relative to the United States. Using purchasing power parity
exchange rates, which take into account differences in prices of goods and services
across countries, China stands at 15 percent and India at 8 percent of the U.S. level
of gross national income per capita. China is faced with a slowing of the increase in
the population of labor force age, but it should be able to sustain its economic
growth in future years, in large part by continuing to shift workers out of agricul-
ture to higher productivity jobs in industry and services. India has an even larger
share of its workforce still in agriculture, which offers still greater opportunities for
reallocation to more productive sectors.
However, China has made much greater progress in raising the educational
skills of younger workers. Indeed, China has essentially eliminated illiteracy among
new entrants to the workforce (OECD, 2005). Enrollment rates are rising rapidly at
every educational level, and 98 percent of China’s primary school enrollees reach
the fifth grade, compared to 60 percent for India. Despite an external reputation
for having a large pool of highly educated persons, India faces serious deficiencies
in the education of the bulk of its youth population.
With respect to capital accumulation, China is actually faced with an excess that
could threaten to disrupt growth through overinvestment in some sectors. In
addition to a national saving rate above 40 percent, the country is the recipient of
private capital inflows equal to 10 percent of GDP. For China, a continued rate of
output growth near 10 percent annually seems easily warranted from the supply
side of the economy.
India faces a more constrained situation. While India’s private saving rate has
increased substantially over the past decade, much of this is drained off into the
financing of a large public sector deficit. Similarly, private capital inflows have
increased; but as a share of GDP, the flow is about half that of China. Current rates
of capital accumulation are consistent with a GDP growth rate near 7 percent, but
higher rates would require reductions in the public sector deficit or increases in
capital inflows from abroad.
However, the differences in public borrowing between China and India may
not be as great as they may appear. India’s government borrows funds directly to
finance its expenditures. China’s government does not report a similar public
sector deficit, but only because it covers the losses of state-owned enterprises with
loans from domestic banks that are unlikely to be repaid. At some future date, the
Chinese government will need to assume the debt directly.
The growth prospects for both China and India depend upon continued
integration with the global economy to deepen and sustain their growth,
including both trade in goods and services and also investment flows. In this
respect, China has had extraordinary achievements in raising the ratio of total
trade (imports plus exports) to GDP to 65 percent in 2004 compared to
14 percent in 1978. India was at the same 14 percent of GDP in 1978 and for
many years lagged far behind China. Recently, however, India’s trade has also
expanded rapidly and reached 42 percent of GDP in 2004. From 2000 –2004,
Table 6
Annual Growth in Exports, China and India, 1995–2004
(percent)
1995–04 1995–2000 2000–2004
China
Total exports 18.1 13.7 23.8
Goods 18.6 14.2 24.2
Services 14.0 9.7 19.7
India
Total exports 12.6 9.5 16.6
Goods 10.1 6.7 14.5
Services 20.6 19.8 21.6
Share of goods in total exports
1995 2000 2004
China 87.0 89.1 90.5

India 82.2 72.2 67.1
Source. World Bank’s 2006 World Development Indicators.
China’s exports expanded at a 24 percent annual rate, but India has also had
extremely rapid growth in exports—17 percent per year—as shown in Table 6.
However, the composition of exports has been much different. Just as with the
sector composition of GDP, China’s exports are concentrated in goods exports,
whereas India’s trade has a much larger services component. The extent of
China’s lead in goods trade is also evident in Table 7, which shows the com-
modity composition of exports. In fact, China’s exports have grown seven-fold
since 1993, compared with a multiple of only three-and-a-half for India. To put
it another way, the volume of India’s merchandise exports is similar to that of
China a decade earlier.
China and India also differ substantially in terms of another measure of
integration with the global economy: foreign direct investment inflows. In recent
years, the inflows into China have exceeded $50 billion per year, and a few years ago
they represented over 4 percent of GDP. The inflows into India have been about
$5 billion and less than 1 percent of GDP. Foreign direct investment can be
important in promoting access to global markets and the accumulation of technol-
ogy and management skills, all of which have been significant in China’s growth.
Overall, we conclude that the supply-side prospects for continued rapid
growth in China and India, in terms of labor, physical capital, and reallocation
across sectors, are very good. Ultimately, India will need to redress its inade-
quate infrastructure and to broaden its trade beyond the current emphasis on
services. Only an expansion of goods production and trade can provide em-
ployment opportunities for its current pool of underemployed and underedu-
cated workers. China has performed well in the international dimension but
now needs to focus on development of domestic markets, reducing inefficien-
Table 7
Exports by Commodity Type, China and India, 1993–2004
(millions of U.S. dollars)
China India
Commodity 1993 2004 1993 2004
Food and live animals 8,381 18,844 3,384 6,843

Beverages and tobacco 901 1,214 159 303
Crude materials, inedible, except fuels 3,041 5,753 1,299 5,514
Mineral fuels, lubricants, and related materials 4,112 14,497 496 6,895
Animal and vegetable oils, fats, and waxes 205 148 101 349
Chemicals and related products 4,590 25,995 1,539 9,106
Manufactured goods, classified chiefly by
material 16,803 101,713 9,096 28,924
Machinery and transport equipment 15,222 268,218 1,513 7,763
Office machines and computers 1,647 87,101 116 388
Telecommunications and sound-recording
equipment 4,522 68,497 48 236
Electrical machinery, apparatus, and appliances 4,437 61,137 228 1,546
Miscellaneous manufactured articles 38,093 155,813 4,287 13,285
Clothing, footwear, and travel goods 25,308 82,908 3,456 7,752
Other 395 1,131 363 864
Source: United Nations, Comtrade database, 具http://comtrade.un.org/db/典.
cies in its financial sector, and achieving a more balanced trade position.
However, none of these concerns can diminish the amazing accomplishments of
both countries and the progress that they have made in lifting two and a half
billion people from abject poverty.
y We are very indebted to Anthony Liu and Gabriel Chodorow-Reich for extensive assistance
in understanding the data and constructing the growth accounts. An earlier draft of this
paper was presented at the annual conference of the Tokyo Club Foundation for Global
Studies, December 6 –7, 2006. The current version benefited from very helpful suggestions by
the JEP editorial staff.
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21. Zhenhui Xu. 2018. China's exports, export tax rebates and exchange rate policy. The World Economy
41:5, 1288-1308. [Crossref]
22. Prema-chandra Athukorala, Zheng Wei. 2018. ECONOMIC TRANSITION AND LABOUR
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23. Mengni Chen, Chi Leung Kwok, Haiyue Shan, Paul S. F. Yip. 2018. Decomposing and Predicting
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24. Peter Josef Stauvermann, Ronald Ravinesh Kumar, Syed Jawad Hussain Shahzad, Nikeel N. Kumar.
2018. Effect of tourism on economic growth of Sri Lanka: accounting for capital per worker, exchange
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25. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Arvind Patel, Selvin Prasad. 2018. The Effect
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26. Hiroyuki Imai. 2018. China’s rapid growth and real exchange rate appreciation: Measuring the
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27. Syed Shafqat Mukarram, Abubakr Saeed, Shawkat Hammoudeh, Muhammad Mustafa Raziq. 2018.
Women on Indian boards and market performance: a role-congruity theory perspective. Asian Business
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28. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Nikeel Kumar, Syed Jawad Hussain Shahzad. 2018.
Exploring the effect of ICT and tourism on economic growth: a study of Israel. Economic Change
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30. Huijiong Wang, Shantong Li. Indicators, Models and Mathematical Modeling 249-304. [Crossref]
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32. Muhammad Umar Draz, Fayyaz Ahmad. 2018. Financial Crises and Key Economic Sectors of China
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33. Alexander Plekhanov. 2018. Modern Growth in Perspective: Relative Performance Since the Global
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34. SHI YUTIAN, JOHN HICKS, P. K. BASU, KISHOR SHARMA, YAPA BANDARA, TOM
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35. Bishwanath Goldar, K. L. Krishna, Suresh Chand Aggarwal, Deb Kusum Das, Abdul Azeez Erumban,
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36. John Bailey Jones, Sohini Sahu. 2017. Transition accounting for India in a multi-sector dynamic
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37. Seth G. Benzell, Guillermo Lagarda. 2017. Can Russia Survive Economic Sanctions?. Asian Economic
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38. Arpita Chatterjee. 2017. Endogenous comparative advantage, gains from trade and symmetry-
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39. Qing-Ping Ma. 2017. Contribution of interest rate control to China’s economic development. Journal
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40. Fabrizio Zilibotti. 2017. Growing and Slowing Down Like China. Journal of the European Economic
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41. Jeannine Bailliu, Mark Kruger, Argyn Toktamyssov, Wheaton Welbourn. 2017. How fast can China
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42. Jong-Wha Lee. 2017. China's economic growth and convergence. The World Economy 1. . [Crossref]
43. Yiming Liu, Yu Hao, Yixuan Gao. 2017. The environmental consequences of domestic and foreign
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44. Yaoguo Wu, Yuegang Song, Guoying Deng. 2017. Institutional Environment, OFDI, and TFP
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45. Basanta K. Pradhan, Joydeep Ghosh, Yun-Fei Yao, Qiao-Mei Liang. 2017. Carbon pricing and terms
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46. Chengjun Shi, Jing Li. 2017. Does dollar-pegging matter? A closer look at US trade deficits with
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47. Manoj Kumar Singh, Harish Kumar, Manmohan Prasad Gupta. 6: Role of Manufacturing Sector to
Develop Smart Economy: A Competitiveness Study between India and China 71-82. [Crossref]
48. Pingfan Hong, Hung-Yi Li. 2017. Avoiding pitfalls in China’s transition of its growth model. Journal
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49. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Arvind Patel, Nikeel Kumar. 2017. The effect of
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Energy Community. Renewable and Sustainable Energy Reviews 70, 1223-1239. [Crossref]
50. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Syed Jawad Hussain Shahzad. 2017. Can
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Quality & Quantity 51:2, 919-939. [Crossref]
51. Muhammad Shahbaz, Ronald Ravinesh Kumar, Stanislav Ivanov, Nanthakumar Loganathan. 2017.
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52. Bas van Leeuwen, Jieli van Leeuwen-Li, Peter Foldvari. 2017. Human Capital in Republican and
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53. Tirthankar Roy. 2017. The Origins of Import Substituting Industrialization in India. Economic
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54. John Joshua. International Trade Relations 99-130. [Crossref]
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58. Sara Hsu, Alba Carolina Melchor Simon. 2016. China’s structural transformation: reaching potential
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59. Shi Li. 2016. Income Inequality and Economic Growth in China in the Last Three Decades. The
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60. Justin Yifu Lin, Guanghua Wan, Peter J. Morgan. 2016. Prospects for a re-acceleration of economic
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61. Harry X. Wu. 2016. Sustainability of China's Growth Model: A Productivity Perspective. China &
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62. Justin Yifu Lin, Guanghua Wan, Peter J. Morgan. 2016. Factors Affecting the Outlook for Medium-
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63. Luis Lanaspa, Fernando Sanz-Gracia, María Vera-Cabello. 2016. The (strong) interdependence
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64. Waseem Khan, Sana Fatima. 2016. An Assessment of Sectoral Dynamics and Employment Shift in
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66. Qianyu Wang, Umesh Sharma, Howard Davey. 2016. Intellectual capital disclosure by Chinese and
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67. Ronald Ravinesh Kumar, Peter Josef Stauvermann. 2016. The linear and non-linear relationship
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68. Yu Zheng. 2016. Institutions, Labor Mobility, and Foreign Direct Investment in China and India.
Studies in Comparative International Development 51:2, 147-168. [Crossref]
69. David KUCERA, Leanne RONCOLATO. 2016. The manufacturing-services dynamic in economic
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70. David KUCERA, Leanne RONCOLATO. 2016. La dinámica manufacturas-servicios y el desarrollo
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71. David KUCERA, Leanne RONCOLATO. 2016. Dynamique industrie-services et développement
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72. Marco Baudino. 2016. The impact of human and physical capital accumulation on Chinese growth
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73. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Arvind Patel. 2016. Exploring the link between
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76. Sai Ding, Alessandra Guariglia, Richard Harris. 2016. The determinants of productivity in Chinese
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77. Har Sandeep Kaur. 2016. Services Exports and SAARC Countries: A Comparative Analysis of Growth,
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78. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Aristeidis Samitas. 2016. The effects of ICT⁎ on
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79. Sumon Kumar Bhaumik, Nigel Driffield, Ying Zhou. 2016. Country specific advantage, firm specific
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80. Jens Matthias Arnold, Beata Javorcik, Molly Lipscomb, Aaditya Mattoo. 2016. Services Reform and
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81. John Ross, Jinghai Zheng, Karla Simone Prime. 2016. What can be learned from China’s success?.
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82. Jong-Wha Lee. 2016. China's Economic Growth and Convergence. SSRN Electronic Journal .
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83. Chu-Ping Lo. 2016. Openness and Urbanization: The Case of the People's Republic of China. SSRN
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85. Olufolajimi Oke, Kavi Bhalla, David C. Love, Sauleh Siddiqui. 2015. Tracking global bicycle
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86. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Nanthakumar Loganathan, Radika Devi Kumar.
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87. Madhur Gautam, Bingxin Yu. 2015. Agricultural productivity growth and drivers: a comparative study
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88. Remi Jedwab, Dietrich Vollrath. 2015. Urbanization without growth in historical perspective.
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89. Odirilwe Selomane, Belinda Reyers, Reinette Biggs, Heather Tallis, Stephen Polasky. 2015. Towards
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90. Shamim Ara. 2015. Gender and jobs: Evidence from urban labour market in India. The Indian Journal
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91. Jane GOLLEY, Zheng WEI. 2015. Population dynamics and economic growth in China. China
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92. X. Yu, G. Dosi, J. Lei, A. Nuvolari. 2015. Institutional change and productivity growth in
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93. Hehe Liu, Tianyu Yang. 2015. Explaining the Productivity Growth Gap Between China and India:
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94. Sohini Sahu. 2015. Source of Service Sector TFP Growth in India: Evidence from Micro-data. South
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95. Ronald Ravinesh Kumar, Radika Devi Kumar, Arvind Patel. 2015. Accounting for telecommunications
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39:3-4, 284-295. [Crossref]
96. Seema Bathla, Alwin D’souza. 2015. Inter-sectoral Productivity Differentials in India. South Asia
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97. Rashmi Umesh Arora, Shyama Ratnasiri. 2015. Recent growth experiences of Asian tigers: where
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98. Bart Los, Marcel P. Timmer, Gaaitzen J. de Vries. 2015. How important are exports for job growth
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100. Stephan Klasen, Janneke Pieters. 2015. What Explains the Stagnation of Female Labor Force
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101. Enrica Chiappero-Martinetti, Nadia von Jacobi, Marcello Signorelli. Human Development and
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102. Ronald R. Kumar, Peter J. Stauvermann. 2014. Exploring the nexus between remittances and
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103. George M. Korres, Aikaterini Kokkinou. 2014. Public Spending Efficiency. International Journal of
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104. Haizheng Li, Qinyi Liu, Bo Li, Barbara Fraumeni, Xiaobei Zhang. 2014. Human capital estimates in
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105. Ronald Ravinesh Kumar. 2014. Exploring the role of technology, tourism and financial development:
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106. Shuai Shao, Tao Huang, Lili Yang. 2014. Using latent variable approach to estimate China‫׳‬s
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107. Ronald Ravinesh Kumar, Madhukar Singh. 2014. Role of health expenditure and ICT in a small
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108. Shuxing Shi, Kunming Huang, Dezhu Ye, Linhui Yu. 2014. Culture and regional economic
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109. Ronald Ravinesh Kumar, Nanthakumar Loganathan, Arvind Patel, Radika Devi Kumar. 2014. Nexus
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110. Ronald Ravinesh Kumar. 2014. Exploring the nexus between tourism, remittances and growth in
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112. Thomas Scherngell, Martin Borowiecki, Yuanjia Hu. 2014. Effects of knowledge capital on total
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113. Ronald Ravinesh Kumar, Peter Josef Stauvermann, Arvind Patel, Radika Devi Kumar. 2014. Exploring
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114. Rupa Chanda. 2014. Introduction. Journal of International Commerce, Economics and Policy 05:01,
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116. Nicholas Crafts, Kevin Hjortshøj O’Rourke. Twentieth Century Growth 263-346. [Crossref]
117. Rajabrata Banerjee, Saikat Sinha Roy. 2014. Human Capital, Technological Progress and Trade: What
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118. Chee Kian Leong. 2013. Special economic zones and growth in China and India: an empirical
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119. Shiyi Chen, Amelia U. Santos-Paulino. 2013. Energy Consumption and Carbon Emission Based
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120. Hans Fehr, Sabine Jokisch, Laurence J. Kotlikoff. 2013. The world’s interconnected demographic/
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121. Ronald Ravinesh Kumar, Radika Kumar. 2013. Effects of energy consumption on per worker output:
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122. Carlo Milana, Jinmin Wang. 2013. Fostering Entrepreneurship in China: A Survey of the Economic
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123. Anping Chen, Nicolaas Groenewold. 2013. Does investment allocation affect the inter-regional output
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124. Yen-Hsiao Chen, Lianfeng Quan, Yang Liu. 2013. An Empirical Investigation on the Temporal
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125. Kamhon Kan, Yong Wang. 2013. Comparing China and India: A factor accumulation perspective.
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126. Shiyi Chen, Amelia U. Santos-Paulino. 2013. Energy consumption restricted productivity re-estimates
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127. Kefei You, Nicholas Sarantis. 2013. Structural breaks, rural transformation and total factor productivity
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128. Kunal Sen. 2013. Why India’s growth miracle may not continue. International Affairs Forum 4:1,
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129. JOHN WHALLEY, XILIANG ZHAO. 2013. THE CONTRIBUTION OF HUMAN CAPITAL
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130. Amparo Castelló-Climent, Abhiroop Mukhopadhyay. 2013. Mass education or a minority well
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131. Ronald Ravinesh Kumar. 2013. Remittances and economic growth: A study of Guyana. Economic
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132. Saibal Ghosh. 2013. Do economic reforms matter for manufacturing productivity? Evidence from the
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133. Hans Fehr, Sabine Jokisch, Manuel Kallweit, Fabian Kindermann, Laurence J. Kotlikoff. Generational
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134. Albert Bollard, Peter J. Klenow, Gunjan Sharma. 2013. Indiaʼs mysterious manufacturing miracle.
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135. Suparna Chakraborty, Keisuke Otsu. 2013. Business Cycle Accounting of the Bric Economies. SSRN
136. Xin Meng. 2012. Labor Market Outcomes and Reforms in China. Journal of Economic Perspectives
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137. Xiaodong Zhu. 2012. Understanding China's Growth: Past, Present, and Future. Journal of Economic
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138. Anindya Chaudhuri. 2012. Creeping Tiger, Soaring Dragon: India, China and Competition in
Information Technologies. China & World Economy 20:6, 1-28. [Crossref]
139. Uma RANI, Patrick BELSER. 2012. Low pay among wage earners and the self-employed in India.
International Labour Review 151:3, 221-242. [Crossref]
140. Uma RANI, Patrick BELSER. 2012. Baja remuneración entre asalariados y trabajadores por cuenta
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141. Uma RANI, Patrick BELSER. 2012. Travailleurs salariés et indépendants faiblement rémunérés en
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142. Ranjan Ray, Ankita Mishra. 2012. Multi-dimensional deprivation in the awakening giants: A
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143. Xu Tian, Xiaohua Yu. 2012. The Enigmas of TFP in China: A meta-analysis. China Economic Review
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144. Gaaitzen J. de Vries, Abdul A. Erumban, Marcel P. Timmer, Ilya Voskoboynikov, Harry X. Wu. 2012.
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145. Peter E. Robertson. 2012. Deciphering the Hindu growth epic. Indian Growth and Development Review
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146. Ronald R. Kumar, Radika Kumar. 2012. Exploring the Nexus between Information and
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147. Jong-Wha Lee, Kiseok Hong. 2012. Economic growth in Asia: Determinants and prospects. Japan
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148. Biru Paksha Paul. 2012. Output relationships of China and India with the USA: How do the Asian
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149. Ben Shepherd, Gloria O. Pasadilla. 2012. Services as a New Engine of Growth for ASEAN, the People’s
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150. Ding Lu. 2011. Transition of China’s growth pattern. Frontiers of Economics in China 6:4, 535-555.
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152. Timothy J. Kehoe, Felipe Meza. 2011. Catch-up Growth Followed by Stagnation: Mexico, 1950-2010.
Latin American Journal of Economics 48:2, 227-268. [Crossref]
153. Srikanth Beldona, Pradeep Racherla, Gokul Das Mundhra. 2011. To Buy or Not to Buy: Indian
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154. Richard G. Harris, Peter E. Robertson, Jessica Y. Xu. 2011. The International Effects of China’s
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155. Thomas Vendryes. 2011. Migration constraints and development: Hukou and capital accumulation in
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156. Hideo Noda, Koki Kyo. 2011. Smoothness Prior Approach to Capturing Rapid Changes in Time-
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157. Xianbo Zhou, Kui-Wai Li, Qin Li. 2011. An analysis on technical efficiency in post-reform China.
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158. Dilip K. Das. 2011. Indian Economy: Growth Performance and Prospects of Transitioning the Growth
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159. Eswar S. Prasad. 2011. Rebalancing Growth in Asia*. International Finance no-no. [Crossref]
160. A. Charles, G. Fontana, A. Srivastava. 2011. India, China and the East Asian Miracle: a human
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161. Loren Brandt, Johannes Van Biesebroeck, Yifan Zhang. 2011. Creative accounting or creative
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162. Zheng Song,, Kjetil Storesletten,, Fabrizio Zilibotti. 2011. Growing Like China. American Economic
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163. Moriki Ohara. Introduction: Different Competition, Different Industrial Dynamics 1-16. [Crossref]
164. Moriki Ohara, Hong Lin. Competition and Management in the Manufacturing Sector in China and
India: A Statistical Overview 19-39. [Crossref]
165. B. Bhaskara Rao, Krishna Chaitanya Vadlamannati. 2011. The level and growth effects of human
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166. Michael Walton, Anusha Nath, Ashoka Mody. 2011. Sources of Corporate Profits in India:Business
Dynamism or Advantages of Entrenchment?. IMF Working Papers 11:8, 1. [Crossref]
167. Stephen Broadberry, Claire Giordano, Francesco Zollino. 2011. A Sectoral Analysis of Italy's
Development, 1861-2011. SSRN Electronic Journal . [Crossref]
168. Timothy J. Kehoe,, Kim J. Ruhl. 2010. Why Have Economic Reforms in Mexico Not Generated
Growth?. Journal of Economic Literature 48:4, 1005-1027. [Abstract] [View PDF article] [PDF with
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169. B. Bhaskara Rao, Artur Tamazian. 2010. A simultaneous equations model of finance and growth:
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170. Joseph Francois,, Bernard Hoekman. 2010. Services Trade and Policy. Journal of Economic Literature
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171. John Hicks, Parikshit K. Basu, Richard B. Sappey. 2010. Ageing, Labour Force Participation and
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Journal of Economic Perspectives—Volume 22, Number 1—Winter 2008 —Pages 45– 66

Accounting for Growth: Comparing

Barry Bosworth and Susan M. Collins

T hrough most of the twentieth century, only those in the high-income

Growth Accounting: An Overview

Growth accounting provides a framework for allocating changes in a country’s

This approach is based on a production function in which output is a function

Y, A, K, and ␣ are measures of output, total factor productivity, physical capital

⌬ln共Y/L兲 ⫽ ␣ 关⌬ln共K/L兲兴 ⫹ 共1 ⫺ ␣兲⌬lnH ⫹ ⌬lnA.

What Do Aggregate Growth Accounts Show?

Contribution to output per worker of

Output per Physical Total factor

1978–2004 China 9.3 2.0 7.3 3.2 0.3 3.6

Source: Authors’ estimates as described in text; Bosworth and Collins (2003).

Output, Employment, and Output per Worker

Decomposing the Sources of Economic Growth

Average years of schooling Share with no schooling (percent)

1960 1980 2000 1960 1980 2000

India 1.4 2.9 4.5 72 56 43

progress in reducing the share of the population with no schooling. Measures of

by 7 percent. This figure is based on a large number of empirical studies relating

What Do Sectoral Growth Accounts Show?

Output per Physical Factor

growth of the aggregate economy.6 China’s growth in agricultural production is

Year/country Agriculture Industry Services Total

Total Agriculture Industry Services Reallocation

Source: Authors calculations as explained in the text.

Some Data Concerns

Is China’s Rate of Economic Growth Overstated?

Is China’s Growth Slowing?

1995–04 1995–2000 2000–2004

Share of goods in total exports

1995 2000 2004

China 87.0 89.1 90.5

Source. World Bank’s 2006 World Development Indicators.

Commodity 1993 2004 1993 2004

Food and live animals 8,381 18,844 3,384 6,843

Source: United Nations, Comtrade database, 具http://comtrade.un.org/db/典.

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