Financial Development,Capital Accumulation and Productivity Improvement: Evidence from China

Financial sector development may contribute to economic growth by facilitating capital accumulation and by improving productivity. This article investigates empirically the contribution that financial development may make to these two alternative drivers of economic growth in China using annual data for the period 1952 to 2005. Using cointegration and Granger-causality testing we examine the relationship between financial development and, respectively, capital accumulation and productivity in a time-series vector autoregression (VAR) framework. The substantive findings are that there is either bi-directional Granger causality between financial development and capital accumulation or that Granger causality runs from capital accumulation to financial development, depending on how capital accumulation and financial development are measured. The link between financial development and productivity is found to be statistically weak.     

Competitiveness of China's Manufacturing Industry and its Impacts on the Neighbouring Countries

This paper investigates the rapid growth of China's share in the international commodity market and the structural changes of China's commodity exports. It demonstrates a significant improvement of international competitiveness in China's manufacturing sector. The panel data analysis, based on a Solow–Swan type growth model on China's 37 manufacturing industries from 1991 to 2002, reveals that the main sources of the strengthened competitiveness of China's manufacturing sector have been mainly from Total Factor Productivity (TFP), while labour productivity has been increasing and capital productivity has been falling. A preliminary empirical analysis on the impacts of China's increasing competitiveness finds that there are negative correlations between China and most of its neighbouring countries, both newly industrialised economies and other Southeast Asian developing economies. However, there is no evidence of negative impacts of China's increasing competitiveness on developed countries such as the United States and Japan.     

The Role of Agriculture on the Recent Brazilian Economic Growth: How Agriculture Competes for Resources

Drawing upon the Global Trade Analysis Project (GTAP) database, and other time series data, we construct a multi‐sector Ramsey model that shows the transition growth of the Brazilian agricultural sector and its effects on growth of the industrial and service sector of the economy, with particular emphasis given to the years 1994–2010. Our results capture the importance of the agriculture's capital intensity and the sector's factor productivity on the sector's growth, the substitution of capital for labor in agriculture, and the sustaining of agriculture's share in Brazilian GDP. These features are rather unique among emerging economies, most of which have experienced a transition out of agriculture and growth in nonfarm production relative to agriculture.     

Firm Productivity,Innovation, and Financial Development

How do firm‐specific actions—in particular, innovation—affect firm productivity? What is the role of the financial sector in facilitating higher productivity? Using a rich firm‐level data set, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. The impact of innovation on productivity is larger in less‐developed countries. Evidence of financial sector development influencing the innovation‐productivity link is weak, but the effect is difficult to identify due to correlation between indicators of a country's financial and nonfinancial development. Furthermore, we find evidence that the innovation effect on productivity is more significant for high‐tech firms than for low‐tech firms.     

Productivity or Endowments? Sectoral Evidence for Hong Kong's Aggregate Growth*

The present paper provides sectoral evidence that sheds new light on the current debate regarding the sources of growth of the East Asian miracle. We test both the productivity‐driven and endowment‐driven hypotheses using Hong Kong's sectoral data. The results show that most of the growth of the service sector is driven by rapidly‐accumulating capital endowments, and not by productivity growth. In addition, productivity growth in the manufacturing sector is unimpressive. The manufacturing sector is revealed to be more labor intensive than the service sector and its growth is hindered by the reallocation of resources into the service sector as a result of the growth of capital endowments and imports. Overall, sectoral evidence supports the endowment‐driven hypothesis.     

An Empirical Analysis of Provincial Productivity in China (1979–2001)

This study estimates and analyzes provincial productivity growth in China for the period 1979–2001. The Malmquist Index approach allows us to decompose productivity growth into two components, technological progress and efficiency change. Considerable productivity growth was found for most of the data period, but it was accomplished mainly through technological progress rather than efficiency improvement. Although China's capital stock has accumulated at record speed in recent years, our findings show that TFP growth slowed down significantly during 1995–2001. The study thus raises serious questions about whether China's recent growth pattern is consistent with its comparative advantages, and whether its reliance on capital accumulation can be sustained in the long run.     

Growth convergence reconsidered

Growth Rate Convergence Reconsidered. —While convergence properties lie at the heart of the endogenous-exogenous growth debate, the empirical literature on convergence to date remains ambiguous. Results appear to be particularly sensitive to the choice of income per capita or labor productivity as dependent variable. The paper shows that the dependence reflects a measurement error arising from the interdependence of human capital accumulation, labor force participation rates and development levels. Estimation of a corrected convergence equation yields results generally supporting convergence except in the manufacturing sector.     

FINANCIAL DEVELOPMENT,ECONOMIC EFFICIENCY,AND PRODUCTIVITY GROWTH: EVIDENCE FROM CHINA

Financial development might lead to productivity improvement in developing countries. In the present study, based on the Data Envelopment Analysis approach, we use the Malmquist index to measure China's total factor productivity change and its two components (i.e., efficiency change and technical progress). We find that China has recorded an increase in total factor productivity from 1993 to 2001, and that productivity growth was mostly attributed to technical progress, rather than to improvement in efficiency. Moreover, using panel dataset covering 29 Chinese provinces over the period from 1993 to 2001 and applying the Generalized Method of Moment system estimation, we investigate the impact of financial development on productivity growth in China. Empirical results show that, during this period, financial development has significantly contributed to China's productivity growth, mainly through its favorable effect on efficiency.     

Total factor productivity, the east Asian miracle, and the world production frontier

Total Factor Productivity, the East Asian Miracle, and the World Production Frontier. — The post WWII growth of the East Asian Tiger states has stimulated the discussion about its determinants. Young and Krugman hold that high capital accumulation rather than gains in efficiency or technological progress has spurred growth. Nelson and Pack, however, have recently criticized the methods of measuring technological progress. Applying the nonparametric approach to frontier production function determination and the Malmquist index of total factor productivity change, the authors take up this criticism. They calculate productivity indicators for a sample of 18 American, Asian, and European countries. For the Tiger states, their results confirm that capital accumulation was the main source of growth in 1960-1973, whereas they find evidence for an increasing importance of efficiency improvements for the growth in 1973-1990.     

Dynamic estimation of the relationship between trade openness and output growth in Asia

This paper studies the relationship between trade openness and output growth for a sample of twenty-three Asian countries using both a static OLS and a dynamic ECM estimation models. At the country specific level, the findings of this study provide robust empirical evidence indicating that higher revealed trade openness is not the main engine explaining the Asian economic-growth miracle. In particular, the authors find that physical capital accumulation is at the core of the observed long-run output per worker growth. At the regional level, the authors observe a marked difference between the pre and post 1997–1998 financial crisis, whereas, in the post period, trade openness has a positive and significant effect on output growth. In general, the results from the dynamic estimations prove that the conventional OLS static estimates underestimate the effect of investment on output growth. In addition, the dynamic model allows for a separation of gains from trade between short term and long term. The paper results also provide evidence in support of the idea that, countries with a growing degree of trade openness may experience faster per-capita output growth through gains in productivity associated to capital accumulation, rather than the assumed technological spillover effects from the trading sector. Again, at the regional level in the post financial crisis period both short term and long term gains from trade are relevant to growth. Why more trade does not necessarily imply faster growth at all levels of revealed trade openness growth, remains a conundrum.     

An Overview of the Proximate Determinants of Economic Growth in Indonesia Since 1960*

In this paper, we address two questions. First, what determined the growth of GDP per worker in Indonesia from 1960 to 2014? We examine Indonesia’s economic performance, using a growth accounting framework. We show that economic growth during the Soeharto era after 1975 was mainly determined by an increase in capital accumulation. Negative growth in total factor productivity (TFP) during the Asian financial crisis was more noticeable in Indonesia than in comparable ASEAN countries. In Indonesia, the contribution of TFP growth turned persistently positive after 1999. Second, what are the key determinants of the GDP per worker differences between Indonesia and the United States? Using data from the recently updated Penn World Table database and employing a levels accounting method, we find that the gap in physical capital deepening between the two countries is of declining importance in explaining the gap in labour productivity between Indonesia and the United States. We then compare our findings with data from the World Bank’s Changing Wealth of Nations 2018.     

The government sector,the export sector and growth

Summary A three-sector, two-input growth model is developed which potentially allows for the separate identification of government and export sector productivity differentials and externality effects. Using data from a limited sample of OECD countries (which are the only countries for which reliable capital stock data are readily available), we find that the export sector is more productive than the rest of the economy, but that neither an externality effect nor a productivity differential can be detected in the case of the government sector.The author wishes to acknowledge financial assistance from a Research Grant from the Division of Commerce of the University of Otago which funded the participation of William M. Jones as research asistant in this work. Thanks are due to Annette Godman for secretarial assistance. The referees of this journal made extensive comments on an earlier version of this paper, and the present version is substantially better thanks to them. Remaining errors are, of course, my responsibility.     

Call For Papers: The Eighth International Convention of the East Asian Economic Association

This paper provides empirical estimates of total factor productivity (TFP) trends in a sample of 17 APEC countries over the period 1975 to 1996. TFP growth is an important measure of an economy's performance and if measured correctly it can provide valuable guidance on issues related to the assessment of sustainable growth trends. We use the Malmquist index to measure TFP growth and decompose it into an efficiency change and a technical change component. This decomposition provides extra insight on assessing sustainable growth trends. The measurement technique itself is regarded as a significant improvement over previous conventional measures of TFP growth. The results are very interesting. Japan, Thailand and primarily Indonesia and Malaysia are identified as countries exhibiting on average negative TFP growth rates in the 1975-1990 period. In all these countries as well as in South Korea and Taiwan the main cause of low TFP growth is a poor (negative) efficiency record. The average TFP growth rate for Japan and Malaysia is positive in the 1975-1996 period but the efficiency change component remains negative. In all these countries the main contributor to labour productivity growth is capital accumulation. Unlike previous studies we find no evidence of a poor TFP growth performance for Singapore. Furthermore, we estimate that most of Singapore's labour productivity growth is driven by efficiency change. Estimates of rates of convergence towards the frontier economy that is estimated (not assumed as in other studies) to be the US, are also reported.     

On Export Composition and Growth

The hypothesis that exports in technology-intensive industries have a higher potential for positive externalities coupled with higher productivity levels (due to higher rates of capitalization) is tested using a comprehensive and detailed data set, covering 45 industrialized and developing countries and including exports of 33 industries over the time period 1981–1997. The estimation results, using a random effects model and employing an instrumental variables estimator, support the hypothesis of qualitative differences between high- and low-tech exports with respect to output growth. The superior performance of high-tech exports stems from their positive productivity differential to the domestic sector, while the externality effect is not significant at any meaningful level of significance. The positive productivity differential is only significant for the subsample of developing countries. No significant effects were found to be present in the subsample of OECD member countries. JEL no. O41, O50, C23, F14     

Growth Patterns and Inequality in the Presence of Costly Technology Adoption

The stylized facts that motivate this article include the diversity in growth patterns that are observed across countries during the process of economic development and the divergence over time in income distributions both within and across countries. We construct a dynamic general equilibrium model in which technology adoption is costly and agents are heterogeneous in their initial holdings of resources. We interpret the adoption cost as the resources expended in acquiring skills associated with new technologies. Endogenous growth occurs in our model largely as a result of human capital deepening. The analytical results of the model characterize three growth outcomes associated with the technology adoption process depending on productivity differences between the technologies. These outcomes are labeled ‘poverty trap,’ ‘dual economy,’ and ‘balanced growth.’ The model is then capable of explaining the observed diversity in growth patterns in addition to the divergence of incomes over time and across countries.     

经济增长与集聚：基于资本积累和知识溢出的研究

文章发展了新经济地理学中包含垂直联系的一般均衡模型,通过放松＂总资本不变＂的假设,将垂直联系、资本积累和知识溢出结合起来,构建了一个内生增长模型,以此分析资本积累和知识溢出对经济增长与集聚的影响。结果显示,发展成为核心区可以通过提高自身的资本积累水平和掌握先进技术、核心技术来实现。对于欠发达地区,既可以通过地方保护或加大中央政府的财政支持力度,提高其资本积累水平,也可以通过增强地区间的合作与交流,提高知识溢出水平,缩小与发达地区的经济差距。     

Social Capital and Total Factor Productivity: Evidence from Chinese Provinces

The impact of social capital on economic development has been broadly studied by scholars. However, research in the Chinese context is relatively rare. Drawing upon data from the China General Social Survey, our results suggest that the enhancing effect of social capital on total factor productivity is very limited in the case of China. The network dimension of social capital is significant only in pooled OLS estimations, and trust as well as the participation dimension of social capital exert no impact across all estimations. Our interpretation is that this is partly due to the fact that trust, values and norms formed in civil society are inherently difficult to transmit to the market sector. Besides, the impact of social capital on economic performance is undermined when physical capital plays a significant role in production. We therefore propose that the effect of social capital on economic performance is contingent on localized social and economic conditions.     

人力资本边际收益递减、后发优势与经济增长——基于国家间面板数据的实证分析

学术界一般认为人力资本边际收益是递增的。本文利用一般动态模型根据世界银行提供的国别数据的实证分析得出的结论刚好相反:人力资本边际收益是递减的。从长期来看,世界的人力资本边际收益呈递减趋势;从国别比较来看,发展中国家的人力资本边际收益高于发达国家。而且从国家层面来看,人力资本存量与经济增长呈负相关关系:人力资本存量低的国家经济增长较快,而人力资本存量高的国家经济增长较慢。人力资本从穷国流向富国而不是相反,这是因为富国的总量劳动生产率高所带来的高工资所致,这并不意味着富国的人力资本边际收益比穷国更高。     

Imported Capital Goods and Manufacturing Productivity: Evidence from Botswana's Manufacturing Sector

This article examines the effects of imported capital goods on manufacturing productivity growth in Botswana. Despite consistent efforts aimed at diversification, Botswana's economy has remained heavily dependent on diamond exports, and the country's productivity remains a point of concern. The ability to apply foreign technologies to increase productivity and spur diversification is limited by the foreign exchange gap. This study uses an imported input growth model to analyse how the importation of capital goods contributes to enabling productivity growth and export diversification. With a panel of 340 manufacturing firms, the study also analyses the effects of imported capital goods on firm productivity growth and skills development. The results show that imported machines and equipment have increase manufacturing productivity after 1‐2 years following the investment. Additionally, foreign‐owned firms were found to enjoy more productivity growth than their domestic counterparts.     

Optimal Structure of Technology Adoption and Creation: Basic versus Development Research in Relation to the Distance from the Technological Frontier*

Many economists maintain that in order to advance economic growth Asian countries should focus more on basic research than on technology adoption, and more on the supply of skilled workers than the supply of unskilled workers. In this context, this paper presents a theoretical model and empirical evidence to explain the observation that a country in which the level of technology approaches the technology frontier tends to rely more on technology creation than adoption, and invest more in basic research than in development. The model shows that technology creation involves both basic and development research processes, whereas technology adoption uses only the latter process. Therefore, R&D investment in our model involves three different processes: basic research in technology creation, development in technology creation, and development in technology adoption. The results suggest first that the rate of growth is positively correlated with the level of basic research activities in the technology creation sector, if a country's technology gap with the technology frontier is small enough. Second, an increase in the efficiency of the education system for highly skilled workers raises the level of basic research and the rate of growth. Third, verifying these theoretical results, empirical analyses using panel data from Korea, Japan and Taipei, China show that the narrower the distance to the technological frontier, the higher the growth effect of basic R&D, which indicates that the share of basic R&D matters for economic growth. Finally, the results also show that the quality of tertiary education has a significantly positive effect on the productivity of R&D.