Why Has China’s Economy Taken Off Faster than India’s?

David E. Bloom, Harvard University
Linlin Hu, Harvard University
Yuanli Liu, Harvard University
Ajay Mahal, Harvard University
Winnie Yip, Harvard University

We investigate the determinants of the modest economic takeoff in India and the rapid economic takeoff in China after 1980. We do this by fitting a model of the growth of income per capita to cross-country panel data for 1960-2000. The model, which predicts reasonably well the “takeoffs” in China and India after 1980, highlights the importance to economic growth of improved health and longevity and an elevated labor force per capita due to falling fertility rates and dependency ratios. We also analyze the welfare benefits of gains in health and find that improvements in health in India mean that full income has risen about 50% more since 1980 than is suggested by economic growth figures. Almost all the welfare gains in China since 1980 have been due to rising consumption with little improvement in population health