The search for determinants of catching up: Theory, the East Asian experience and the Chinese case

This paper aims to develop a framework to identify the key determinants of a country's growth in late development and apply the framework to analyze the case of China. I analyze the possible necessary and sufficient conditions for catching up. The analyses suggest that an adequate location, initial human capital and institutional arrangements are among the key determinants; for the majority of developing countries, institutional arrangements alone dictate catching up or not. If the institutional arrangements are efficient, then a follower can achieve what I term long-term potential growth rate provided that there exists an adequate location and initial human capital. The experience of Japan and the East Asian newly industrializing economies is evaluated in the framework. Based on the framework of catching up and the experience of East Asia, the Chinese case is analyzed. The analyses suggest with high probability that China will sustain high growth and get close to its long-term potential growth rate in the coming decades: 7–10% annually in the next 15 years and 5–7% annually in the following 15 years.