Technology adoption and multiple growth paths: An intertemporal general equilibrium analysis of the catch-up process in Thailand

As opposed to the Veblen—Gerschenkron catching-up hypothesis, the recent literature allows for technological divergence in backward economies. We extend a nonlinear adoption function to include openness and interact with capital accumulation in an intertemporal general equilibrium framework. The threshold gap necessary to catch up is endogenously determined by the economy's absorptive capacity. The model generates multiple transition growth paths depending on whether technological catch-up is achieved, and due to the endogeneity of the threshold gap, endogenous switching between development paths might be observed. Our simulations of the Thailand experience show how lack of investment in education and protectionism generate loss of transition growth and technological divergence. The paper highlights the role of absorptive capacity, and especially its importance for economies on the balance between low growth and high growth paths. JEL no. O41, O53     

Economic growth in Asia: Determinants and prospects

Using a growth accounting framework, we find that developing Asia grew rapidly over the past three decades mainly due to robust growth in capital accumulation. The contributions of education and total factor productivity in the region's past economic growth remain relatively limited. We also make long-run growth projections for developing Asia by combining the growth accounting framework with growth regression approach. Our baseline projections based on the model of conditional convergence show that the gross domestic product (GDP) growth rates of the 12 developing Asian economies covered by this paper will be consistently lower for the next two decades than their historical performance. However, policy reforms in education, property rights, and research and development can substantially raise GDP growth in the region and partly offset the slowdown in growth caused by the convergence phenomenon. Even under the baseline scenario, the region's share in the world economy will increase from the current 34 percent in 2009 to close to a half in 2030.     

Measuring the Natural Rate of Interest with Financial Gaps: The Cases of Japan and South Korea

We estimate “finance-adjusted” trend growth and natural rates of Japan and South Korea by extending a semi-structural model of (Laubach and Williams, 2003). Consistent with international evidence of the advanced economies, both trend growth and natural rates of interest of Japan and South Korea have been declining over the past, suggesting the important role of global factors. However, the declining patterns of Japan and South Korea are far steeper during the past 25 years. When considering domestic and global financial factors, trend growth and natural rate of South Korea are more affected by foreign financial factor while the role of domestic financial factor is more pronounced for Japanese economy.     

Openness and economic growth in developing countries

Openness and Economic Growth in Developing Countries. — Openness appears to have a strong impact on economic growth especially in DCs which typically exhibit a high share of physical capital in factor income and a low share of labor. In the neoclassical growth model with partial capital mobility, physical capital’s share in factor income determines the difference in the predicted convergence rates for open and closed economies. With a 60 percent share as in many DCs, the convergence rates should differ by a factor of 2.5. The regression results for a sample of open and closed DCs roughly confirm this hypothesis.     

How Can China Avoid the Middle Income Trap?

Many middle income economies have been unable to advance to become high income economies over a period of 50 years or longer, not due to the existence of middle income traps, but because of the overly broad income range in the definition of middle income economies. The middle income trap is, in essence, a growth trap, and refers to the situation in which a middle income economy experiences growth stagnation or a growth rate that is lower than that of high income economies. Nonetheless, it is hard to fully comprehend the formation of the trap solely based on growth theories. Historical data indicate that the middle income economies do not lack growth potential, and the real problem is that although their long‐term average growth rates are higher than those of the high income economies, their average growth rates over a business cycle or an even longer period of time often fall below those of the high income economies. The cause of this phenomenon is neither short‐term macroeconomic fluctuations nor long‐term growth potential, but the frequent occurrence of financial crises in middle income economies. As a middle income economy, China is also facing the risk of a financial crisis, and the key to avoiding the middle income trap is to guard against future financial crises, preventing unsound financial liberalization and mismanagement of the corporate debt ratio.     

The Asian crisis,private sector saving,and policy implications

The Asian financial crisis has several critical implications for the saving behavior in the crisis-hit economies as well as in other Asian economies, which are summarized as follows: increase in economic uncertainty; increase in poverty; decrease in public confidence in financial institutions; financial liberalization; and reduction in corporate leverage ratio. Putting these together, the postcrisis saving rates in the crisis economies are likely to decrease without government interventions. Although the uncertainity factor may contribute to an increase in short-term saving, an abated level in household income and corporate output and slow GDP growth will lead to a contraction in saving rates. Increased poverty, diminished public confidence in banking institutions, and the increased variability of business sales will further contribute to a reduction in saving rates of the household and corporate sectors. Keeping this in mind, the postcrisis saving policy should consider stronger macroeconomic stabilization policies to reduce the underlying economic uncertainty to encourage long-term savings/investments; improving the public confidence in financial institutions through financial restructuring and a proper deposit insurance scheme in place; channeling informal sector saving into the formal financial institutions; and promoting propoor saving policies.     

Unsustainable sovereign debt—is the Euro crisis only the tip of the iceberg?

As a direct effect of the financial crisis in 2008, public debt began to accumulate rapidly, eventually leading to the European sovereign debt crisis. However, the dramatic increase in government debt is not only happening in European countries. All major G7 countries are experiencing similar developments. What are the implications of this kind of massive deficit and debt policy for the long term stability of these economies? Are there limits in debt-ratios that qualitatively change policy options? While theory can easily illustrate these limits, where are these limits in real economies? This paper examines the relationship between sovereign debt dynamics and capital formation, and accounts for the effects of the 2008 financial crisis on debt sustainability for the four largest advanced economies. We contribute to the literature on fiscal sustainability by framing the problem in an OLG model with government debt, physical capital, endogenous interest rates, and exogenous growth. For the calibration exercise we extract data from the OECD for Germany as a stabilization anchor in Europe, the US, the UK, and Japan for almost two decades before the 2008 crisis. Except for intertemporal preferences, all parameters are drawn or directly derived from the OECD database, or endogenously determined within the model. The results of the calibration exercise are alarming for all four countries under consideration. We identify debt ceilings that indicate a sustainable and unsustainable regime. For 2011 all four economies are either close to, or have already passed the ceiling. The results call for a dramatic readjustment in budget policies for a consolidation period and long-term fiscal rules that make it possible to sustain sufficient capital intensity so that these economies can maintain their high income levels. Current conditions are already starting to restrict policy choices. However, the results also make it very clear that none of these economies would survive a second financial crisis such as the one in 2008.     

Resources,techniques, and strategies south of the Sahara: revising the factor endowments perspective on African economic development, 1500–20001

This article seeks to revise and re‐apply the factor endowments perspective on African history. The propositions that sub‐Saharan Africa was characterized historically by land abundance and labour scarcity, and that the natural environment posed severe constraints on the exploitation of the land surplus, are broadly upheld. Important alterations are suggested, however, centred on the seasonality of labour supply, Ruf's concept of ‘forest rent’, and, for precolonial economies, the role of fixed capital. This revised endowments framework is then applied in order to explore the long‐term dynamics of economic development in Africa, focusing on how the economic strategies of producers and political authorities created specific paths of change which shifted the production possibility frontiers of the economies concerned, and ultimately altered the very factor ratios to which the strategies had been responses.     

Saving,productivity and national income: a discrete-time geometric framework

This paper proposes an alternative geometric framework for analysing the inter-relationship between domestic saving, productivity and income determination in discrete time. The framework provides a means of understanding how low saving economies like the United States sustained high growth rates in the 1990s whereas high saving Japan did not. It also illustrates how the causality between saving and economic activity runs both ways and that discrete changes in national output and income depend on both current and previous accumulation behaviour. The open economy analogue reveals how international capital movements can create external account imbalances that enhance income growth for both borrower and lender economies.     

The Making of Australia's Supermarket Duopoly, 1958–2000

Australian supermarkets had one of the highest levels of concentration among developed economies by 2000. This paper explores the making of a duopoly comprising Coles and Woolworths. We present historical data on market shares in Australia and international comparisons for around 2000. We identify the evolution of their dynamic capabilities through the lens of Teece, Pisano and Shuen's positions, paths and processes (1997). The industrial organisation literature stresses interaction become rivals, notably pre-emptive strategies including sunk costs (Lee and Ng 2007; Sutton 1991). We argue that the development of dynamic capabilities enabled the execution of various pre-emptive strategies.     

制度内生化的经济增长模型

本文在内生经济增长的框架下,在描述制度变迁的动态过程的基础上,将制度因素纳入经济增长模型并作为其内生变量,力求从物质资本、人力资本、技术进步和制度创新等角度全面反映经济增长,并揭示制度创新影响经济增长的内在机制,得出结论,有效的制度安排是经济高速增长的决定性因素。     

Models of financially repressed developing economies

The past decade has witnessed an explosion of research on financial sector models of financially repressed developing economies. For the most part, financial repression is interpreted to be the technique of holding interest rates (particularly deposit rates of interest) below their free market equilibrium levels. The recent spate of activity in this field was produced by the simultaneous publication in 1973 of books by McKinnon and Shaw. Both authors demonstrate how economic theory can be applied to the analysis of the effects of financial conditions on investment and the real rate of economic growth. Since 1973, models of financially repressed developing economies have been formalized mathematically, extended to open economies in order to analyse exchange rate policies, and tested empirically. This paper presents a critical survey of the major contributions to the literature in this field since 1973.     

地区经济的平衡增长和模式选择

在地区经济发展出现多个收敛的俱乐部现象之后,如何实现地区经济的平衡发展已成为当前我国构建和谐社会的重要课题。本文运用经济增长模型对我国地区经济发展状况进行分析,并进一步指出实现地区经济平衡增长的关键在于根据自身要素分布的特点与经济发展的水平建立起相应的工业经济发展模式。     

Adjustment policies in developing countries: A reassessment

This paper analyses policy responses to external shocks by developing countries in the 1974–1976 and 1979–1981 periods. It is shown that outward-oriented economies relied largely on output-increasing policies of export promotion and import substitution to offset the balance-of-payments effects of external shocks in both periods and accepted a temporary decline in the rate of economic growth in order to limit their external indebtedness. In turn, inward-oriented economies failed to apply output-increasing policies of adjustment. They financed the balance-of-payments effects of external shocks by foreign borrowing in the 1974–1976 period, and had to take deflationary measures in 1979–1981 as their increased indebtedness limited the possibilities for further borrowing. The policies applied led to substantially higher rates of economic growth in outward-oriented than in inward-oriented economies, with the differences in growth rates offsetting the differences in the size of external shocks several times.     

Openness and growth in East Asia after the Asian crisis

Openness with respect to trade in goods, services and foreign direct investment has a positive marginal effect on growth. The fast-growing East Asian economies were early openers, and this contributed to their fast growth. However, East Asian countries are not relatively open today. This factor, together with the convergence effect of fast growth in the past, imply that their economies will slow down. Their growth prospects are further reduced by growing geographic discrimination against their goods and services in world markets, and the slow down of the Japanese economy.     

A Tale of Two Countries and Two Stages: South Africa,China and the Lewis Model

The paper compares the economic progress of two countries, South Africa and China, in relation to the Lewis model. These economies are chosen because they have interesting similarities and also interesting differences. At the start of economic reform in China and with the advent of democracy in South Africa, both countries had surplus labour: they were at the first, labour-surplus, stage of the Lewis model. It is shown that, since then, South Africa has continued to experience surplus labour: the unemployment rate has risen. By contrast, China’s labour market is shown to have tightened, and there is evidence that China has entered the second, labour-scarce, stage of the Lewis model. The difference lies in their growth rates. There are sections explaining why the South African economy has grown slowly and why the Chinese economy has grown rapidly, in relation to the growth of their labour forces. The Lewis model provides an enlightening framework for explaining how widely the fruits of economic development can be shared.     

Factor shares,inequality, and capital flows

I present an endogenous growth model where innovations are factor saving and model the choice of technologies in an Overlapping Generations framework. Markets are competitive and factor prices are determined by marginal productivity of factors; therefore, the income share of reproducible factors increases with the stage of development. Beyond the standard results of this type of model I find that (i) without bequests long‐run growth is not possible, (ii) if the economy presents long‐run growth then intrageneration inequality may last forever but if the economy does not present long‐run growth then in steady state, there is no intrageneration inequality, (iii) when the economy is open, the pattern of capital flows depends not only on the relative abundance of factors but also on the technologies and, for this reason, capital may not flow from rich to poor economies, and (iv) consistently, capital flows may not help to break poverty traps.     

Reconsidering the International Comovement of Inflation

In this paper we reconsider the degree of international comovement of inflation rates. We use a dynamic hierarchical factor model that is able to decompose Consumer Price Index (CPI) inflation in a panel of countries into (i) a factor common to all inflation series and all countries, (ii) a factor specific to a given sub-section of the CPI, (iii) a country group-factor and (iv) a country-specific component. With its pyramidal structure, the model allows for the possibility that the global factor affects the country-group factor and other subordinated factors but not vice versa. Using quarterly data for industrialized and emerging economies from 1996 to 2011 we find that about two thirds of overall inflation volatility is due to country-specific determinants. For CPI inflation net of food and energy, the global factor and the CPI basket-specific factor account for less than 20 % of inflation variation. Only energy price inflation in industrial economies is dominated by common factors.     

Openness,Lobbying, and Provision of Infrastructure

Casual empirical evidence suggests that infrastructure provision is higher in economies that are open to world trade. We develop a model of imperfect competition to show that open economies are likely to provide more infrastructure than closed economies. If infrastructure is financed by taxing a producer lobby, the open economy will overprovide while the closed economy will underinvest; an open economy approaches optimal provision when this lobby group is small in size. If financing of infrastructure is done by taxing the whole population, the closed-economy outcome may be preferred relative to that of the open economy.     

The determinants of capital intensity in Japan and the US

We estimate the determinants of capital intensity in Japan and the US, characterized by striking different paths. We augment an otherwise standard Constant Elasticity of Substitution (CES) model with demand-side considerations, which we find especially relevant in the US. In this augmented setting, the elasticity of substitution between capital and labor is placed between 0.74 and 0.90 in Japan, and around 0.30 in the US. We also find evidence of biased technical change, which is capital-saving in Japan but labor-saving in the US. These differences help us explain the diverse experience in the capital deepening process of these economies, and lead us to conclude that demand-side drivers, quite relevant in the US, may also be relevant to account for different growth experiences. A close look at the nature of technological change is also needed before designing one-size-fits-all industrial, economic growth, and/or labor market policies.