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Growth Accounting with Misallocation: Or, Doing Less with More in Singapore

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  • John Fernald
  • Brent Neiman

Abstract

We show that in a two-sector economy with heterogeneous capital subsidies and monopoly power, primal and dual measures of TFP growth can diverge from each other as well as from true technology. These distortions give rise to dynamic reallocation effects that imply technology growth needs to be measured from the bottom up rather than from the top down. Using Singapore as an example, we show how incomplete data can be used to estimate aggregate and sectoral technology growth as well as reallocation effects. Our framework can reconcile divergent TFP estimates in Singapore and can resolve other empirical puzzles regarding Asian development. (JEL E22, E23, E25, O33, O41, O47)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.29
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 3 (2011)
Issue (Month): 2 (April)
Pages: 29-74

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Handle: RePEc:aea:aejmac:v:3:y:2011:i:2:p:29-74

Note: DOI: 10.1257/mac.3.2.29
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Citations

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Cited by:
  1. Jesus Felipe & J. S. L. McCombie, 2004. "On The Rental Price Of Capital And The Profit Rate: The Perils And Pitfalls Of Total Factor Productivity Growth," CAMA Working Papers 2004-10, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Jesus Felipe & John McCombie, 2012. "Aggregate Production Functions and the Accounting Identity Critique: Further Reflections on Temple's Criticisms and Misunderstandings," Economics Working Paper Archive wp_718, Levy Economics Institute.
  3. Gita Gopinath & Brent Neiman, 2014. "Trade Adjustment and Productivity in Large Crises," American Economic Review, American Economic Association, vol. 104(3), pages 793-831, March.
  4. Albert Bollard & Peter Klenow & Gunjam Sharma, 2013. "India's Mysterious Manufacturing Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 59-85, January.
  5. Robert M. Townsend & Hyeok Jeong, 2007. "Sources of TFP Growth: Occupational Choice and Financial Deepening," 2007 Meeting Papers 198, Society for Economic Dynamics.
  6. Bigsten, Arne & Durevall, Dick, 2004. "Kenya’s Development Path and Factor Prices 1964-2000," Working Papers in Economics 142, University of Gothenburg, Department of Economics.
  7. Rod Tyers, 2008. "Competition Policy, Corporate Saving and China's Current Account Surplus," ANU Working Papers in Economics and Econometrics 2008-496, Australian National University, College of Business and Economics, School of Economics.
  8. S.M. Thangavelu & Toh Mun Heng, 2005. "Bilateral “WTO-Plus†Free Trade Agreements : The WTO Trade Policy Review of Singapore 2004," Trade Working Papers 22590, East Asian Bureau of Economic Research.
  9. Loukas Karabarbounis & Brent Neiman, 2013. "The Global Decline of the Labor Share," NBER Working Papers 19136, National Bureau of Economic Research, Inc.

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