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This paper uses the standard one-sector neoclassical growth model to investigate why China’s consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that the price of capital may have been significantly...
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reduces the employment level, the share of employment in the population, the hourly wage, the interindustry wage premium, and … the share of informal employment. The industry-level results indicate that a rise in import penetration from either China … or the rest of the world (ROW) reduced the employment level, hourly wage, and share of informal employment while …
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