Methodological tools and economic models to analyse the transition to a new development trajectory in China

Abstract

The primary objective of this conceptual paper is to provide the reader with a methodological toolkit for analysing China’s transition to a new economic trajectory based on qualitative production factors such as research and development and innovation, as well as highly skilled human capital, etc., which thereby could help the country in escaping the middle-income trap. The nature of the proposed methodology is impact assessment, i.e., the paper discusses the ways and means of assessing and predicting the impact of policy measures on the economy. The use of a specific set of indicators and the application of the DEA-SBM and the PSM-DID models is proposed for quantitative analyses amended by the Markov Chain Model for predictions. The main contribution of this paper to the existing body of knowledge is the proposition of a comprehensive model for evaluating economic development in general. By exploring the role of economic policies, a deeper understanding can be obtained of how the economy should be reformed and developed. It is a valuable and practical approach to compare differences and solve problems at the macro, mezzo, and microeconomic levels that can be applied to other regions and countries facing similar challenges.