The extent of the market, capital, communication technology and economic growth: The case of China 1952-1998

The implications of the division of labor, capital and technology for economic growth have long been a fundamental issue in development economics. This paper employs the error correction mechanism for cointegration to examine the relationship between the extent of the market, capital accumulation, communication technology and economic growth for China for the period 1952-1998. We find that both in the short-run and long-run, capital stock, the extent of the market and investment all have statistically significant positive effect on growth, while telecoimunication technology, seemingly a bit surprising, has a statistically insignificant impact on growth. We also examine the cointegration between division of labor, capital and communication technology and find no evidence of a long run relationship among these variables. Our empirical analysis lends support to the thesis that technology and capital accumulation maybe overshadowed by institutions in determining division of labor and the long run economic growth