economics 121: the macroeconomics of development with special reference to east asia
DESCRIPTION
Economics 121: The Macroeconomics of Development with Special Reference to East Asia. Lawrence J. Lau, Ph. D., D. Soc. Sc. (hon.) Kwoh-Ting Li Professor of Economic Development Department of Economics Stanford University Stanford, CA 94305-6072, U.S.A. Spring 2000-2001 - PowerPoint PPT PresentationTRANSCRIPT
Economics 121:The Macroeconomics of Development
with Special Reference to East Asia
Lawrence J. Lau, Ph. D., D. Soc. Sc. (hon.)Kwoh-Ting Li Professor of Economic Development
Department of EconomicsStanford University
Stanford, CA 94305-6072, U.S.A.
Spring 2000-2001
Email: [email protected]; WebPages: http://www.stanford.edu/~ljlau
Lecture 9 The Sources of Economic Growth in
Developed and Developing Economies
Lawrence J. Lau, Ph. D., D. Soc. Sc. (hon.)Kwoh-Ting Li Professor of Economic Development
Department of EconomicsStanford University
Stanford, CA 94305-6072, U.S.A.
Spring 2000-2001
Email: [email protected]; WebPages: http://www.stanford.edu/~ljlau
Lawrence J. Lau, Stanford University
3
Introduction Tangible capital accumulation is the most important source
of growth in developing economies Technical progress is the most important source of
economic growth in developed economies The controversy over the role of technical progress in
postwar East Asian economic growth Kim and Lau (1992, 1994a, 1994b) Paul Krugman (1994) The World Bank (1993) Alwyn Young (1992, 1995)
Lawrence J. Lau, Stanford University
4
Rates of Growth on Inputs & Outputs of theEast Asian NIEs and the G-5 Countries
Ta ble 2 .1 : A v e ra g e A nnua l R a te s o f G ro w th o f O utput a nd Inputs (pe rc e nt)
E c o no m y P e rio d G D P C a pita l L a bo r H um a n R & DS to c k H o urs C a pita l C a pita l
H o ng K o ng 6 6 -9 0 7 .8 9 2 .6 2 .3 N AS ing a po re 6 5 -9 0 9 1 0 .4 4 .3 3 .4 1 5 .9S . K o re a 6 4 -9 0 9 1 3 3 .8 3 .7 1 4 .6Ta iw a n 6 4 -9 0 9 1 2 .1 2 .9 2 .4 1 4 .5J a pa n 6 4 -9 2 5 .5 8 0 .5 0 .8 8 .9F ra nc e 6 4 -9 1 3 .2 5 .2 -0 .3 1 .3 5W . G e rm a ny 6 5 -9 1 3 4 .4 -0 .6 1 .1 5 .7U .K . 6 5 -9 1 2 .1 3 .8 -0 .3 0 .9 2 .1U .S . 4 9 -9 2 3 3 .1 1 .5 0 .8 6 .1
Lawrence J. Lau, Stanford University
5
The Estimated Parameters of the Aggregate Meta-Production Function
Table 6.2 Estimated Parameters of the Aggregate Production Function
Parameter I+II+IV+V(2)+VI I+II+IV+VI
Y0 0.293 (399.295) 0.331 (318.414)
aK 0.256 (8.103) 0.245 (7.929)
aL 0.63 (6.666) 0.524 (5.077)
B KK -0.074 (-7.445) -0.058 (-4.919)
B LL -0.073 (-1.101) -0.012 (-0.178)
B KL 0.032 (1.324) 0.025 (1.103)
C iK
Hong Kong 0 0.062 (2.443)Singapore 0 0.045 (1.702)South Korea 0 0.026 (1.197)Taiwan 0 0.024 (1.523)France 0.083 (8.735) 0.1 (6.394)West Germany 0.074 (6.761) 0.089 (5.465)Japan 0.072 (3.927) 0.098 (3.483)UK 0.046 (5.749) 0.056 (5.045)United States 0.061 (7.592) 0.067 (6.321)
R-sq 0.753 0.753D.W. 1.448 1.473
Lawrence J. Lau, Stanford University
6
The Findings of Kim & Lau (1992, 1994a, 1994b) using data from early 50s to late 80s (1) No technical progress in the East Asian NIEs but
significant technical progress in the industrialized economies (IEs) including Japan
(2) East Asian economic growth has been input-driven, with tangible capital accumulation as the most important source of economic growth (applying also to Japan) Working harder as opposed to working smarter
(3) Technical progress is the most important source of economic growth for the IEs, followed by tangible capital, accounting for over 50% and 30% respectively, with the exception of Japan NOTE THE UNIQUE POSITION OF JAPAN!
Lawrence J. Lau, Stanford University
7
The Findings of Kim & Lau (1992, 1994a, 1994b) using data from early 50s to late 80s (4) Despite their high rates of economic growth and rapid
capital accumulation, the East Asian Newly Industrialized Economies actually experienced a significant decline in productive efficiency relative to the industrialized countries as a group
(5) Technical progress is purely tangible capital-augmenting and hence complementary to tangible capital
(6) Technical progress being purely tangible capital-augmenting implies that it is less likely to cause technological unemployment than if it were purely labor-augmenting
Lawrence J. Lau, Stanford University
8
Accounts of Growth:Kim & Lau (1992, 1994a, 1994b)
Table 2.2: Relative Contributions of the Sources of Economic Growth (percent)
Economy Tangible Labor TechnicalCapital Progress
Hong Kong 74 26 0Singapore 68 32 0S. Korea 80 20 0Taiwan 85 15 0Japan 56 5 39Non-Asian G-5 36 6 59
Lawrence J. Lau, Stanford University
9
Purely Capital-Augmenting Technical Progress
Y = A0(t) F(AK(t)K, AL(t)L)
= A0F(AK(t)K, ALL)
= A0F(AK(1+ciK)tK, ALL)
The production function canalso be written as:
= A0F(AK eciK.tK, ALL)
Lawrence J. Lau, Stanford University
10
Implications of Rejection of the Hypothesis of Purely Labor-Augmenting Technical Progress Technical progress is not simply equivalent to more labor
(One thousand janitors are not equivalent to a Kenneth Arrow)
The existence of a steady state growth can no longer be assured
Capital-augmenting technical progress implies the complementarity between tangible capital and technical progress (intangible capital)
Lawrence J. Lau, Stanford University
11
Production Elasticities of CapitalProduction Elasticities of Tangible Capital
0
0.1
0.2
0.3
0.4
0.5
0.6
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
HON KOR SIN
TWN JPN NAG5
Lawrence J. Lau, Stanford University
12
Production Elasticities of Labor
Production Elasticities of Labor
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0.55
0.6
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
HON KOR SIN
TWN JPN NAG5
Lawrence J. Lau, Stanford University
13
Degrees of Returns to Scale
Degrees of Returns to Scale
0.6
0.65
0.7
0.75
0.8
0.85
0.9
0.95
1
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
HON KOR SIN
TWN JPN NAG5
Lawrence J. Lau, Stanford University
14
Empirical Evidence for the Hypothesis of No Technical Progress in East Asian NIEs Tsao (1985) and Young (1992) for Singapore Kim & Lau (1992, 1994a, 1994b) and Young (1995) for
the four East Asian NIEs Paul Krugman (1994) Kim & Lau (1996) extend the same finding to other East
Asian economies--China, Indonesia, Malaysia, Philippines, and Thailand
Lawrence J. Lau, Stanford University
15
Empirical Evidence Against the Hypothesis of No Technical Progress Young (1992) for Hong Kong The World Bank (1993) Credibility of such studies undermined by restrictive
maintained hypotheses such as CONSTANT RETURNS TO SCALE
NEUTRALITY OF TECHNICAL PROGRESS & INSTANTANEOUS COMPETITIVE PROFIT
MAXIMIZATION
Lawrence J. Lau, Stanford University
16
International and Intertemporal Comparison of Productive Efficiency: A Thought Experiment Suppose all countries have the same quantities of
measured inputs of capital and labor as the United States What would have been the quantities of their real outputs?
and How would they evolve over time?
WE COMPARE THEIR OUTPUTSHOLDING MEASURED INPUTS CONSTANT!
Lawrence J. Lau, Stanford University
17
Hypothetical Output Levels
H ypo the tic al O utput Le vels (Tril lio n U S$ in 19 80 prices )
0
0 .5
1
1 .5
2
2 .5
3
3 .5
Tri
llio
n U
.S.
Do
lla
rs (
1980
pri
ces)
USA FRA GER UK JPN
HON KOR S IN TWN
Lawrence J. Lau, Stanford University
18
Relative Productive Efficiency(U.S.=100%)
Re lat ive Produ ctive Eff icienc y (U.S .=10 0% )
0
10
20
30
40
50
60
70
80
1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988
Pe
rce
nt
FRA GER UK JPN
HON KOR S IN TWN
Lawrence J. Lau, Stanford University
19
The Sources of Economic Growth:Selected East Asian and Western Economies
The Contributions of the Sources of Growth (percent)
Capital Labor Technical Progress
East Asian EconomiesChina 92.2 9.2 -1.4Hong Kong 55.8 16.0 28.2Indonesia 115.7 11.5 -27.2Japan 62.9 4.7 32.4Malaysia 70.9 18.7 10.4Philippines 99.5 18.0 -17.5Singapore 60.0 20.9 19.1South Korea 86.3 12.7 1.0Taiwan 88.9 8.6 2.5Thailand 71.9 12.7 15.4Western Industrialized EconomiesFrance 37.8 -1.3 63.5West Germany 43.7 -6.3 62.6United Kingdom 46.0 3.7 50.3United States 32.9 26.2 40.9
Lawrence J. Lau, Stanford University
20
The Sources of Economic Growth:Selected East Asian and Western Economies
The C ontr ibutions of the Sour ces of E conomic G row th:Se lected Ea st As ian and W estern E co no mies
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Chi
na
Hon
g K
ong
Indo
nesi
a
Japa
n
Mal
aysi
a
Phili
ppin
es
Sing
apor
e
Sout
h K
orea
Tai
wan
Tha
iland
Fran
ce
Wes
t Ger
man
y
Uni
ted
Kin
gdom
Uni
ted
Stat
es
Per
cent
C ap italLaborTech nica l Pro gress
Lawrence J. Lau, Stanford University
21
Human CapitalAverage Human C ap ital (Years o f S cho o ling p er W o rking-Age P erso n)
0
2
4
6
8
10
12
14
19531955
19571959
19611963
19651967
19691971
19731975
19771979
19811983
19851987
19891991
19931995
Yea
rs p
er W
ork
ing
-Ag
e P
erso
n
Ch in a Ho n g Ko n g
In d o n es ia S. Ko rea
M alay s ia Ph ilip p in es
Sin g ap o re T a iwan
T h ailan d Jap an
No n -A s ian G5
Lawrence J. Lau, Stanford University
22
Sources of Economic Growth with Explicit Inclusion of Human Capital
Table 2.3: Relative Contributions of the Sources of Economic Growth (percent)
Intangible CapitalTangible Labor Human R&D Technical TotalCapital Capital Capital Progress
Hong Kong 66 22 11 NA 0 11Singapore 63 25 13 NA 0 13S. Korea 67 19 14 NA 0 14Taiwan 75 14 11 NA 0 11Japan 48 6 3 NA 43 46Non-Asian G-5 32 7 5 NA 57 62
Lawrence J. Lau, Stanford University
23
Simultaneous Capital- and Human Capital-Augmenting Technical Progress
Y = A0(t) F(AK(t)K, AH(t)H, AL(t)L)
= A0F(AK(t)K, AHH, ALL)
= A0F(AKK, AH(t)H, ALL)
= A0F(A(t)KH
, ALL)
Lawrence J. Lau, Stanford University
24
R&D Expenditureas a Percentage of GDP
P ercen tag e o f T ota l R &D Ex pen diture in GD P (Cu rre nt P rices )
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993
Pe
rce
nt
USA FRA GER
UK JPN HON
KOR S IN TWN
Lawrence J. Lau, Stanford University
25
R&D CapitalR & D C apita l S tock (B illion 1980 US $)
0
100
200
300
400
500
600
700
800
900
19491951
19531955
19571959
19611963
19651967
19691971
19731975
19771979
19811983
19851987
19891991
19931995
Bil
lio
n 1
98
0 U
S$
US Canada France
W . Germany Italy UK
J apan S . Korea S ing apore
Taiwan
Lawrence J. Lau, Stanford University
26
Sources of Economic Growth with Explicit Inclusion of Human and R&D Capital
Table 2.4: Relative Contributions of the Sources of Economic Growth (percent)
Intangible CapitalTangible Labor Human R&D Technical TotalCapital Capital Capital Progress
Korea 62 18 5 15 0 20Singapore 56 22 5 16 0 21Taiwan 65 15 4 16 0 20Japan 37 5 1 8 49 58Non-Asian G-7 40 4 4 10 43 56
Lawrence J. Lau, Stanford University
27
The Sources of Growth: Further Results with Extended Sample--Lau and Park (2000)
Tangible Capital Labor Technical P rogressHong K ong 74.46 25.54 0South K orea 78.2 21.8 0Singapore 64.8 35.2 0Taiwan 84.04 15.96 0Japan 49.9 4.84 45.26Non-Asian G-5 Countries 38.71 2.77 58.52
Tangible Capital Labor Technical P rogressHong K ong 74.61 25.39 0South K orea 82.95 17.05 0Singapore 63.41 36.59 0Taiwan 86.6 13.4 0Indonesia 88.79 11 .21 0Malaysia 66.68 33.32 0P hilippines 66.1 33.9 0Thailand 83.73 16.27 0China 94.84 5.16 0Japan 55.01 3.7 41.29Non-Asian G-5 Countries 41.51 1.97 56.53
Sample (G-5 + 4 NIEs)
Sample (G-5 + 9 Asian)
Lawrence J. Lau, Stanford University
28
The Sources of Growth: Further Results with Extended Sample--Lau and Park (2000)
Tangible Capital Labor Human Capital R&D Capital Technical ProgressSouth Korea 63.35 13.61 2.1 20.94 0Singapore 47.33 21.55 1.37 29.75 0Taiwan 58.73 11.42 1.32 28.54 0Japan 44.83 5.2 0.82 14.63 34.52Non-Asian G-7 Countries 33.71 3.71 1.32 12.53 48.72
Lawrence J. Lau, Stanford University
29
Sources of Economic Growth with Breaks in the Rates of Capital Augmentation (1985)
Tangible Capital Labor Human Capital Technical P rogressHong K ong 48.41 27.57 8.16 15.86South K orea 51.23 24.78 11 .59 12.4Singapore 46.73 32.43 10.86 9.99Taiwan 58.26 21.61 9.87 10.27Japan 38.89 9.17 3.24 48.7Non-Asian G-5 Countries 30.13 7.09 5.21 57.57
Tangible Capital Labor Human Capital Technical P rogressHong K ong 56.89 23.65 2.51 16.94South K orea 65.45 18.62 3.84 12.08Singapore 53.1 33.94 3.23 9.73Taiwan 71.26 15.61 3.15 9.99Indonesia 71.2 14.59 9.38 4.83Malaysia 54.22 32.47 5.12 8.19P hilippines 54.05 37.81 8.15 -0 .01Thailand 60.84 18.06 5.65 15.44China 83.87 11 .92 4.21 0Japan 49.04 5.23 1.08 44.65Non-Asian G-5 Countries 37.44 3.36 1.7 57.49
Sample (G-5 + 9 Asian)
Sample (G-5 + 4 NIEs)
Lawrence J. Lau, Stanford University
30
Sources of Economic Growth with Breaks: Sub-periods
Ta ng ible C a pita l L a bo r H um a n C a pita l Te c hnic a l P ro g re ssH o ng K o ng 6 5 .3 4 3 1 .6 5 3 0S o uth K o re a 7 4 .6 6 2 0 .5 8 4 .7 6 0S ing a po re 6 0 .0 9 3 5 .9 7 3 .9 4 0Ta iw a n 7 9 .9 2 1 6 .4 3 3 .6 4 0Indo ne sia 7 6 .4 4 1 2 .4 1 11 .1 5 0M a la ysia 6 1 .1 4 3 2 .6 9 6 .1 7 0P hilippine s 5 5 .7 8 3 5 .3 6 8 .8 6 0Tha ila nd 7 0 .7 7 2 0 .9 2 8 .3 1 0C hina 8 3 .0 5 1 2 .3 6 4 .5 9 0J a pa n 5 0 .8 4 5 .4 8 1 .0 6 4 2 .6 2N o n-A sia n G -5 C o untrie s 3 9 .6 9 0 .8 8 1 .7 1 5 7 .7 2
H o ng K o ng 4 0 .8 1 8 .6 1 1 .5 8 4 9S o uth K o re a 4 4 .9 6 1 4 .1 9 1 .8 3 9 .0 6S ing a po re 3 7 .3 5 2 9 .1 9 1 .6 3 1 .8 6Ta iw a n 4 1 .4 5 1 2 .6 1 1 .4 4 4 .5 3Indo ne sia 6 0 .2 5 1 9 .0 9 5 .6 3 1 5 .0 3M a la ysia 4 3 .3 3 2 .0 4 3 .4 4 2 1 .2 2P hilippine s 4 9 .7 1 4 4 .0 3 6 .2 9 -0 .0 3Tha ila nd 4 9 .0 1 1 4 .6 1 2 .5 1 3 3 .8 6C hina 8 5 .7 5 1 0 .9 3 .3 5 0J a pa n 3 4 .9 9 3 .1 7 1 .1 9 6 0 .6 4N o n-A sia n G -5 C o untrie s 2 7 1 4 .6 6 1 .6 3 5 6 .7 2
S a m ple (G -5 + 9 A sia n)1 9 6 0 s-1 9 8 5
1 9 8 6 -1 9 9 5