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Physical capital accumulation in Asia 12: Past trends and future projections

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  • Shioji, Etsuro
  • Vu, Tuan Khai
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    Abstract

    The pace of capital accumulation in East Asia has simply been stunning. In this paper, we investigate sources of this fast accumulation and make projections for the future. We estimate a “convergence” equation for physical capital per capita, which is derived from an open economy growth model, using a pooled cross-country, across-decade sample of the entire world. We also conduct projections for the next two decades. We find that an economy with a low level of capital stock per capita tends to experience faster accumulation subsequently. Asian economies have certainly benefited from this “convergence effect”. But on the other hand, other factors such as a low rule of law score and high investment goods prices have worked against them. Our projection shows that, if those economies wish to maintain their current pace of fast capital accumulation, the keys would be to reduce distortions in the domestic market and to improve the quality of institutions.

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    Bibliographic Info

    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 24 (2012)
    Issue (Month): 2 ()
    Pages: 138-149

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    Handle: RePEc:eee:japwor:v:24:y:2012:i:2:p:138-149

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    Web page: http://www.elsevier.com/locate/inca/505557

    Related research

    Keywords: Capital stock; Investment; Asia; Economic growth; Cross country regressions; Projections; Asian economies;

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    1. Ho, Tsung-Wu, 2003. "The saving-retention coefficient and country-size: The Feldstein-Horioka puzzle reconsidered," Journal of Macroeconomics, Elsevier, vol. 25(3), pages 387-396, September.
    2. Robert J. Barro & Jong-Wha Lee, 2010. "A New Data Set of Educational Attainment in the World, 1950–2010," NBER Working Papers 15902, National Bureau of Economic Research, Inc.
    3. King, Robert G. & Levine, Ross & DEC, 1994. "Capital fundamentalism, economic development, and economic growth," Policy Research Working Paper Series 1285, The World Bank.
    4. Bahmani-Oskooee, Mohsen & Chakrabarti, Avik, 2005. "Openness, size, and the saving-investment relationship," Economic Systems, Elsevier, vol. 29(3), pages 283-293, September.
    5. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(358), pages 314-29, June.
    6. Lee, Jong-Wha & Hong, Kiseok, 2010. "Economic Growth in Asia: Determinants and Prospects," ADB Economics Working Paper Series 220, Asian Development Bank.
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