You are on page 1of 11

AsianEconomy

LectureNote4

VariousTopicsinGrowthTheory
andEmpirics
YasuyukiTodo
WasedaUniversity

GrowthAccounting
Y BK L1
B : totalfactorproductivity(TFP)
Y B
K
L
(1 )
Y B
K
L
B Y
K
L
(1 )
B Y
K
L
Paymenttocapitalowners
shareofcapital
Totalproduction
1 / 3accordingtoquantitativeresults
2

196690
HongKong
Singapore
SouthKorea
Taiwan
19852005
Finland
UK
USA

GDP
growth

Capital
growth

Labor
growth

TFP
growth

7.3
8.5
10.3
9.4

7.7
10.7
12.9
11.8

2.6
4.5
5.4
4.6

2.3
0.2
1.7
2.6

2.4
2.6
2.9

0.7
1.1
0.9

0.2
0.4
1.0

1.9
1.1
1.0

Asia:Young(1995),TheTyrannyofNumbers:ConfrontingtheStatisticalRealitiesofthe
EastAsianGrowthExperience,QuarterlyJournalofEconomics,110(3).
OECD:OECDStatExtracts

CapitalAccumulationv.s.TechnologicalProgress
SlowtechnologicalprogressinEastAsia
(particularlySingapore)
Somecounterevidence
(Hsieh2002,AmericanEconomicReview)

But,thisfinding(+Krugmansarticle)
ChangeinpoliciesinSingapore
towardproinnovation(andithasworked!)

ResearchersinR&D(permillionpeople)
7000
6000
5000
4000
3000
2000
1000
0
19962000

20012005

20062010

2011

Japan

Korea,Rep.

China

HongKong

Malaysia

Philippines

Singapore

Thailand

OECDaverage
Source:WorldDevelopmentIndicators

SummaryofTheoreticalConclusions
EffectonpercapitaGDPgrowth
Intransition
InLR
(condi onal
CurrentpercapitaGDP
No
convergence)
Physicalinvestment

No

Humancapitalinvt

No

Populationgrowth

(Solow)

+(Jones)

Populationsize
Efficiencyin
innovation/imitation

+(Romer)
+

+
6

EmpiricalTests:GrowthRegressions
ln yit ln yi 0
0 1 ln yi 0 2 sIi 3 sHi 4 ni 5 X i i
t
Growthrateof
GDPpercapita

0 0
ifconditional
convergence

Factorsaffecting
efficiencyin
innovation/imitation
(manycandidates)

Manyempiricalstudiesusingcountryleveldata
found1<0, 2>0, 4<0.
Predictionsofneoclassicalgrowthmodelsare
mostlysupported.
7

EmpiricalTests:GrowthRegressions
Manystudiesalsoexaminedeffectsof
manyfactorsthatpossiblyinfluencegrowth,
butresultsarelessclear.(Durlauf,etal.2005)

EducationasaBaseofR&D
Publicexpenditureasa%ofGDP

7
6
5
4
3
2
1
0
19962000

20012005

20062010

2011

Japan

Korea,Rep.

China

HongKong

Malaysia

Philippines

Singapore

Thailand

OECDaverage
Source:WorldDevelopmentIndicators

CorrelationbetweenEducationandIncome
GDPpercapita(PPP,const$)

100000

10000

1000
0

2
4
6
8
10
Publicexpenditureoneducation(%ofGDP)
Source:WorldDevelopmentIndicators

10

ExaminingMoreFundamentalCausesofGrowth

Durlauf,etal.2005

11

PovertyTrapsinTheory
2sectors
Hightechsector:increasingreturnstoscale
(output produc vity)
Lowtechsector:constantreturnstoscale
2possibletrajectories
Large(small)hightechsectorinitially
productivity:hightech>(<)lowtech
Growth(stagnation)ofhightechsector
high(low)income
Historymatters.Expectationsalsomatter.
Krugman,Paul,1991,HistoryversusExpectations,QuarterlyJournalofEconomics106.

12

MiddleIncomeTrapinTheory
2ChannelsoftechnologytransfertoLDCs
Foreigndirectinvestment(FDI):
Lesscostlytousenewtechnologyforproduction,
butdifficulttoactuallylearnthetechnology
OwnR&D
Morecostlybecauselearningnewtechnologyis
necessary
2possibletrajectories
UtilizeFDIinitially produc on,butnodomes c
knowledgeimprovement relyonlyonFDI
UtilizeownR&Dinitially ownknowledge
relyonownR&D
TodoY.(2005).TechnologyAdoptioninFollowerCountries:WithorwithoutLocalR&D
Activities?TopicsinMacroeconomics. 5(1).
13

StagnantR&DIntensityinManyLDCs
Increasing
R&Dintensity

Stagnant
R&Dintensity

InmanyS.E.
countries(e.g.,
Thailand,Indonesia),
R&Dintensityhas
beenstagnant,
despitehighgrowth
inGDPpercapitain
thesecountries

TodoY.(2005).TechnologyAdoptioninFollowerCountries:WithorwithoutLocalR&D
Activities?TopicsinMacroeconomics. 5(1).
14

R&Dexpenditure/GDP(%)
4
China

3.5

India

Indonesia

2.5

Malaysia

Philippines
Thailand

1.5

HongKong

SouthKorea

0.5

Japan
2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

Singapore

Source:WorldDevelopmentIndicators

15

ImplicationsofTrapModels
Economiesmaybetrappedinmarketequilibrium.
Governmentinterventionisneededtoescape
fromthetrap.
Bigpushpolicies
Developmentofhightechsector(Krugman)or
R&Dsector(Todo)beyondthethresholdlevel
isnecessary.
Promotingexpectations
Doublingincomeplanin1960sinJapan
GrowthpredictionbytheChinesegovernment
Butthesepoliciesdonotalwayswork,
socautionisneeded.

16

ConditionalConvergenceor
Poverty/MiddleIncomeTraps?
Middleincome
trap

Closebutnopovertytrap
$1000

$3000

$8000

GrowthrateofGDPpercapita
inthe5yearperiod

FiaschiandLavezzi(2007),Nonlineareconomicgrowth:Sometheoryandcrosscountry
evidence,JournalofDevelopmentEconomics.

12
10
8
6
4
2
0
2
4
6

1980
85

1990
95

2000
05

2005
10

17

Sustainedhighgrowth
inChina

1995
2000

1985
90

Middleincometrap
inThailandandMalaysia?
500

5000
50000
GDPpercapita(constantPPP$)intheinitalyear

China

HongKong

India

Indonesia

Japan

SouthKorea

Malaysia

Philippines

Singapore

Thailand

UnitedStates

Source:WorldDevelopmentIndicators 18

PoliciesinthePetrochemicalIndustry
inJapanandSouthKorea(KimandMa1996)
Japaninthe1950sand60s
ThegovernmentrestrictedFDIandpromoted
technologylicensingfromforeignfirms
Koreainthe1970s
Governmentfinancedprojectsshouldengage
localfirmsastheprimecontractor.
Unpackagingimportedtechnologies
(Therewerecompetitionsevenundersuch
regulations.)
19

ChinasFDIPolicy
ChinahasattractedFDIsince1990s.
Atthesametime,itencouragesforeignfirmsto
establishR&DcentersinChina.
Motolora:1993
ShanghaiGM:1997
MicrosoftResearchAsia:1998
Researchcollaborationbetweenforeignfirmsand
localfirms/universitiesisalsoencouraged.
PromotingtechnologytransferfromFDI
20

AutomobileIndustryinMalaysiaandThailand
Production
(000)
Main
players

Problems

Malaysia
570 (2010)
570(2012)
2national
companies
(FDIrestricted)

Thailand
1,640(2010)
2,480(2012)
FDIfromJapan

Heavy relianceon
Less competition
FDI
withinthecountry
LocalR&Dnot
lessincentiveto
promoted
improvetechnology
(changingrecently)

21