Industrialization and Economic Growth in China: A Panel Test of Kaldor’s Growth Laws

Abstract

China has experienced sustained and rapid economic growth since its reform in 1978. Researchers have cast lots of attentions to explain China’s economic growth and attributed it to the rapid growing manufacturing in the process of industrialization. Regional economic growth and industrialization process in China from 1978-2016 are shown in this paper. Using province panel data, this paper explores the relationship between total output growth and manufacturing growth based on Kaldor’s laws to answer whether manufacturing is the engine of economic growth. The regression results confirm all hypotheses in Kaldor’s growth laws. Positive relationship between manufacturing and GDP growth is confirmed. Increasing returns to scale is verified in manufacturing. Employment from non-manufacturing to manufacturing can improve the labor productivity and growth rate of total output.