Submission of
"China's Economic Growth 1978-2025: What We Know Today about China's Economic Growth Tomorrow."
(as of 26 Dec. 06, the above version is outdated; see my homepage http://ihome.ust.hk/~socholz for the most recent version)

Here are the two referee reports from the JCE: 1, 2.

The editor of the JCE, John Bonin, seems to simply copy/summarize what the referees say; here is his decision.
(How does he choose the referees?)

After receiving his decision together with the referee reports, I wrote to John Bonin:

Date: Fri, 07 Jul 2006 16:04:47 +0800
From: "Carsten A. Holz" <socholz@ust.hk>
Subject: Ms. #06A-70(?) --- China's Econmic Growth 1978-2025...
To: JCE@Wesleyan.edu

Dear Professor Bonin,

I have received your decision to reject my paper "China's Economic Growth 1978-2025: What We Know Today About China's Economic Growth Tomorrow." You explain your rejection by referring to five points made by the referees. Appended below is my response to all points that the referees make, thus including the five points in the rejection letter. I do not think any of the five points on which you base your rejection are valid. Perhaps you could read my response and then judge again? If you came to the same (or a similar) conclusion as I do, then I would ask you to bother a new set of referees, and to let me know that you are doing so. If I don't hear from you by 13 July, I'll send the paper to another journal.

Best,
Carsten
 

R1(a) "The major equation on p. 14..." This (production function) is not the major equation. It is a prelude to a new approach. I have included the prelude because the reader might expect it, to show that it? not applicable to the case of China, and I should probably just take it out altogether --- all coefficients are insignificant. From the prelude (prod fcn estimation) I conclude that output elasticities in China in the reform period are not constant, and the typical prod. fcn estimation thus not useful for growth projections. The referee compares to Young (2003) --- Young (2003) does *not* estimate a prod. fcn but simply uses factor shares. The referee compares to Chow and Chow/Li, which seems fine, but to assume that Chow and Chow/Li are the truth, and that, because I get a different result, what I am doing is wrong, is not fine. --- I have a brief critique of Chow and Chow/Li in my China Economic Review 17-2 article(s) (Holz-article, Chow response, Holz reply, with an online appendix by me on Chow and Chow/Li); apart from their capital series being highly questionable and their dropping observations that are inconvenient, I vaguely think/remember that at some point Chow is involved in estimating an ARIMA "prod fcn" (no longer a prod fcn).

R1(b) (i) "... using average years of schooling ... questionable..." I acknowledge (and I also use other variables), but the objective of my paper is not the in this case impossible perfection, but to get as far as possible with the little information we have. (ii) Is the referee not aware of the micro literature that relates wages to education? Is the referee, who in his/her report refers to only 2 pages in my paper (where I find that the aggregate production function is not stable), aware of my very different approach to the issue, on pp. 17-24, and aware of all the other things that I am doing in my paper, of which the accounting exercise is only one?

R2(i) "The first point is the definition of PPP and nominal GDP..." No, the first point is not the definition of ..., but the exploration of different growth scenarios.

R2(ii) "The second point is about the production function..." No, the prelude to the third substantial section of the paper is an explanation of why I cannot use a pseudo production function to get at future economic growth in China (the output elasticities are not constant over time).

R2(iii) "The third point is about the analysis on national income composition or recomposition. Why should GDP be defined by wages, physical labour and capital surplus?" Please address this question to those who designed the System of National Accounts as promulgated by the United Nations and used in the U.S., in China, and elsewhere. GDP growth, by the *definition* of GDP in the income approach, equals the sum of these and other terms. I am not doing anything beyond rewriting a definitional identity (and it's still just that once I am done with the rewriting).

R2(iv) "The cointegration analysis on wages and capital have serious empirical problems as the time series is really short for cointegration analysis. The variables that are included in the VAR models are selected without any theoretical guidance."
      I agree that the time series is short (as it is in just about all papers). From my textbook on time series econometrics (Enders) I did not learn that it is *too* short.
      In my understanding, theoretical guidance in time series econometrics is typically weak. I suppose I should add in my paper a couple of references to microeconomic wage equations where people do for individuals what I do economy-wide. Quantity and quality of labor data are the only things we know with relative certainty for the next twenty years. In the third substantive section of my paper (only), I use this information to predict future growth in an acounting framework (not prod-fcn based) as well as I can.

R2(v) "[1]Overall, the paper does not provide any new theoretical contribution to the literature on economic growth. [2]It does not provide a sound empirical analysis and estimation on the future trend of Chinese GDP. [3]It is also poorly organized and structured."
[1] That's not my objective, nor the mission of the JCE, as far as I can tell.
[2] I wonder what, in the referee's view, would be sound empirical analysis. S/he doesn't give me any hint. From the referee's comments my only guess can be a production function estimation. As I show, it's not stable in China in the reform period, and I move on to a new approach. Underlying my paper are about 200 pages of *documented* data manipulations/ calculations; a subset of such *calculations,* when done by Alwyn Young, for the past only, justified publication in the QJE (2003) (with the conclusion that TFP in China can be anything). My paper is not about TFP, and I leave the derivation of variable values to documentation *outside* the paper. My paper focuses on what we can learn about China's future economic growth.
[3] I would have preferred to have pointed out to me in what way the paper is poorly organized and structured. (I just don's see it at this moment. ­ I can see it being poorly organized only if this paper were about production function estimations, but prod fcn estimation makes up only about 5% of the value or space of this paper, and is just a prelude to something else.)

If you were willing to re-review this paper, I would be happy to cut the prod fcn passage first, so as not to offend anybody. Obviously there is little point in continuing with this paper if you already don't like it yourself, and then I'd rather send it to another journal on 14 July, the default solution.

which yielded the following response:

Date: Fri, 07 Jul 2006 09:06:29 -0400
From: JOURNAL OF COMPARATIVE ECONOMICS <JCE@wesleyan.edu>
Subject: Re: Ms. #06A-70(?) --- China's Econmic Growth 1978-2025...
X-Sender: jce@jce.mail.wesleyan.edu
To: "Carsten A. Holz" <socholz@ust.hk>

Dear Dr. Holz:
We are presently out of the country but I have the JCE records with me.  These records indicate that Manuscript #06A-70 was rejected on June 19, 2006.  Therefore, you are free to do as you wish with the manuscript.
Sincerely yours,
Helene

At which point, the matter ended.