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Growth Accounting for a Follower-Economy in a World of Ideas : The Example of Singapore

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  • Kong Weng Ho

    (SMU)

  • Hian Teck Hoon

Abstract

In this paper, we take another approach to accounting for the sources of Singapores economic growth by being explicit about the channels through which Singapore, as a technological follower, benefits from international R&D spillovers. Taking into account the channels through which technology developed in the G5 countries diffuses to technological followers, we show that 57.5 percent of Singapores real GDP per worker growth rate over the 1970-2002 period is due to multifactor productivity growth. In particular, about 52 percent of the growth is accounted for by an increase in the effectiveness of accessing ideas developed by the technology leaders through improvement in our educational quality and increase in machinery imports and foreign direct investment from the G5 countries. We also find that capital accumulation that takes the form of imports of machinery as well as foreign direct investment from the G5 countries enhances the effectiveness of technology transfer thus raising the rate of return to capital. Compared to the rate of return to capital inferred from the traditional Solow growth model with purely exogenous technological progress of 10.8 percent, taking into account the technology transfer channel raises the implied rate of return to 13 percent.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22435.

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Date of creation: Jan 2006
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Handle: RePEc:eab:develo:22435

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Keywords: technological diffusion; idea production function; multifactor productivity growth;

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  1. Barro, Robert J. & Sala-i-Martin, Xavier, 1995. "Technological Diffusion, Convergence and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1255, C.E.P.R. Discussion Papers.
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  7. Chang-Tai Hsieh, 2002. "What Explains the Industrial Revolution in East Asia? Evidence From the Factor Markets," American Economic Review, American Economic Association, American Economic Association, vol. 92(3), pages 502-526, June.
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  14. Alwyn Young, 1992. "A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 13-64 National Bureau of Economic Research, Inc.
  15. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  16. Park, Walter G, 1995. "International R&D Spillovers and OECD Economic Growth," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 33(4), pages 571-91, October.
  17. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 189, Cowles Foundation for Research in Economics, Yale University.
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Cited by:
  1. Hian Teck Hoon & Kong Weng Ho, 2007. "Distance to Frontier and the Big Swings of the Unemployment Rate: What Room is Left for Monetary Policy?," Kiel Working Papers 1347, Kiel Institute for the World Economy.

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