Kraay, Aart

Development Research Group, The World Bank
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Macroeconomics, Debt management, Economic growth, Inequality and shared prosperity
Development Research Group, The World Bank
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Last updated: January 31, 2023
Aart Kraay is Director of Research in the Development Research Group at the World Bank. He joined the World Bank in 1995 after earning a Ph.D. in economics from Harvard University (1995), and a B.Sc. in economics from the University of Toronto (1990). His research interests include international capital movements, growth and inequality, governance, and the Chinese economy. His research on these topics has been published in scholarly journals such as the Quarterly Journal of Economics, the Review of Economics and Statistics, the Economic Journal, the Journal of Monetary Economics, the Journal of International Economics, and the Journal of the European Economic Association. He is an associate editor of the Journal of Development Economics, and co-editor of the World Bank Economic Review. He has also held visiting positions at the International Monetary Fund and the Sloan School of Management at MIT, and has taught at the School of Advanced International Studies at Johns Hopkins University.
Citations 714 Scopus

Publication Search Results

Now showing 1 - 2 of 2
  • Publication
    Neither a Borrower Nor a Lender : Does China's Zero Net Foreign Asset Position Make Economic Sense?
    (World Bank, Washington, DC, 2005-12) Dollar, David; Kraay, Aart
    China in the past few years has emerged as a net foreign creditor on the international scene with net foreign assets slightly greater than zero percent of wealth. This is surprising given that China is a relatively poor country with a capital-labor ratio about one-fifth the world average and one-tenth the U.S. level. The main questions that the authors address are whether it makes economic sense for China to be a net creditor and how they see China's net foreign asset position evolving over the next 20 years. They calibrate a theoretical model of international capital flows featuring diminishing returns, production risk, and sovereign risk. The calibrations for China yield a predicted net foreign asset position of -17 percent of China's wealth. The authors also estimate nonstructural cross-country regressions of determinants of net foreign assets in which China is always a significant outlier with 5 to 7 percentage points more of net foreign assets relative to wealth than is predicted by its characteristics. China's extensive capital controls can explain why its current net foreign asset position is far away from what is predicted by open-economy models and cross-country empirics. It seems reasonable to assume that China's international financial integration will increase over time. The authors calibrate and predict different scenarios out to 2025. These scenarios are necessarily speculative, but it is interesting that they typically imply negative net foreign asset positions between 3 and 9 percent of wealth. What may be counter-intuitive for many policymakers is that successful institutional reform and productivity growth are likely to lead to more negative net foreign asset positions than occurs with stagnation. Starting from China's zero net foreign assets position, it would take current account deficits in the range of 2-5 percent of GDP to reach any of these net foreign assets positions. These are not unreasonable deficits, but they require a large adjustment from the present 6 percent of GDP current account surplus.
  • Publication
    Growth in China 1978-2008 : Factor Accumulation, Factor Reallocation, and Improvements in Productivity
    (World Bank, Washington, DC, 2011-05-17) Bulman, David; Kraay, Aart
    China's economic success over the past three decades can be decomposed into three broad contributions to growth; accumulation of labor and capital, growth induced by structural transformation (i.e. the reallocation of labor and capital across sectors and ownership units), and growth in total factor productivity. Understanding the evolution of these three growth determinants is important for understanding China s future growth potential. For example, in the neoclassical growth model, rapid growth through factor accumulation eventually slows with the onset of diminishing returns. And growth achieved through the reallocation of factors of production from less efficient to more efficient uses will also eventually peter out as marginal products of factors are equated across units. In this paper we perform a growth accounting exercise for China which allows us to separate these three broad contributions to growth. The main novelty of our exercise lies in our efforts to understand the role of reallocation of both capital and labor across major sectors (agriculture, industry, and services), and across ownership forms (state, collective, and other).