Table 1. GDP per capita average annual growth rate for Four Decades (1970-2010)
|Region |Subgroup | Year |Value% |Year |Value% |
|Africa |Total |1970-1990 |0.9 |1990-2010 |2.1 |
|China |Total |1970-1990 |6.6 |1990-2010 |9.2 |
Source:UN-WorldBank, http://data.un.org/Data.aspx?q=china+growth+rate&d=SOWC&f=inID%3a93%3bcrID%3a358 http://data.un.org/Search.aspx?q=africa+growth+rate. Background to China’s growth rate
Table 1 shows and reflects the growth disparity between China and the sub-Saharan African Countries across four decades. In brief, growth in Africa has been lower than in other regions of the world, China particularly. With China’s rapid GDP Per Capita average annual growth rate of 6.6% for the period 1970-1990, for Africa it was 0.9%. The period 1990-2010 also was a remarkable period for China as GDP per capita average annual growth rate for that period increased significantly at 9.2% while sub-Saharan African GDP per capita average annual growth rate can only increase to 2.1%. The differences GDP per capita average annual growth rate for Four Decades in China and Africa can be attributed to differences in level of savings and differences in level of investment rate which in turn affect the growth rate (Solow 1956). One of the notion for convergence toward steady rate isSo many literatures and articles have tried to address this issue of Growth disparities across regions, many attributing the disparities to Savings and Investment rates. Differences in consumption pattern, Bad Governance, Geographical Location, Political instability, Poor Policy formulation and implementation and so on. But one need to be careful when looking at these issues and approaches to understanding economic growth and applying the various Economic growth models. As Knight and Ding (2012) put it: “It is another important question to ask if the different approaches to understanding economic growth apply equally to rich and poor Countries? Because most of those economic growth model has been formulated with the advanced Economies and analytical tractability in mind”. The China’s remarkable growth can be ink to many reasons, Ding and Knight (2012). Discusses a number of reasons for China’s growth performance such as high investment rate, high migration of rural workers from Agriculture because of the incentives, population policy, High Human capital formation, rate of school enrolment, rapid structural change in the Chinese economy, as industrialization proceeded.
The Solow Model as a Theory of Relative Growth Rates
The best way to using Solow model to explain relatives growth rates is to use countries that are not in the steady state. Because any Country that has rate of investThe farther an economy is from its steady state, the faster it will grow quickly
On the issue of reasons for growth disparity between sub-Saharan African Countries and China, Two areas were identified in this Coursework:
(A) The different level of capital accumulation between China and Africa, in absolute terms, or relative to GDP, investment rate; the high price of investment goods for African investors; differences in productivity of investment; and (B) Geographical disadvantages.
I will try as much as possible to discuss each of them briefly.
Table 2 Capital Accumulation, Comparative Investment Rates, Africa versus China, 1960-1992, Investment rate
|Region |Capital stock, |National prices |International prices (3)|