Academic journal article International Advances in Economic Research

Contrasting the Convergence Performance of China and India

Academic journal article International Advances in Economic Research

Contrasting the Convergence Performance of China and India

Article excerpt

The recent economic growth rates of China and India have revived the convergence hypothesis wherein less developed countries (LDCs) could catch up with advanced countries if three conditions are met. First, there has to be a gap in the level of productivity between the rich and the LDCs. Second, the annual rate of growth of per capita productivity would have to favor the LDCs. Third, a reasonable time horizon up to half a century may be required. The policy parameters affecting several socio-economic and political factors are heuristically estimated to examine the recent rapid per capita convergence of China and India with the United States verifying the absolute convergence hypothesis. This was made possible as their birth rates were significantly reduced from 2.78 to 0.63 percent for China (1971-2004) and 2.3 to 1.44 percent for India (1975-2004). In addition, both countries dramatically shifted to pro-growth public policies (since 1987 for China and 1991 for India). This includes adopting policies in favor of open economies, investment in human capital, emphasis upon regional growth zones with tax incentives, adopting market economies, and embracing globalization. If these trends continue unabated, China and India's per capita income will converge with the United States within the current century approximately in the years 2035 for China and 2095 for India. …

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