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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 derive aggregate growth-accounting implications for a two-sector economy with heterogeneous capital subsidies and monopoly power. In this economy, measures of total factor productivity (TFP) growth in terms of quantities (the primal) and real factor prices (the dual) can diverge from each other as well as from true technology growth. These distortions potentially give rise to dynamic reallocation effects that imply that change in technology needs to be measured from the bottom up rather than the top down. We show an example, for Singapore, of how incomplete data can be used to obtain estimates of aggregate and sectoral technology growth as well as reallocation effects. We also apply our framework to reconcile divergent TFP estimates in Singapore and to resolve other empirical puzzles regarding Asian development.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2010-18.

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Date of creation: 2010
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Handle: RePEc:fip:fedfwp:2010-18

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Keywords: Industrial productivity ; Productivity ; Technology ; Singapore;

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Citations

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Cited by:
  1. Areendam Chanda & Bibhudutta Panda, . "Productivity Growth in Goods and Services Across The Heterogeneous States of America," Departmental Working Papers 2014-10, Department of Economics, Louisiana State University.
  2. Hyeok Jeong & Robert M. Townsend, 2005. "Sources of TFP Growth: Occupational Choice and Financial Deepening," IEPR Working Papers 05.28, Institute of Economic Policy Research (IEPR), revised May 2005.
  3. Gita Gopinath & Brent Neiman, 2011. "Trade adjustment and productivity in large crises," Working Papers 11-9, Federal Reserve Bank of Boston.
  4. 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.
  5. Brent Neiman, 2013. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.
  6. Jesus Felipe & J. S. L. Mccombie, 2007. "On the Rental Price of Capital and the Profit Rate: The Perils and Pitfalls of Total Factor Productivity Growth," Review of Political Economy, Taylor & Francis Journals, vol. 19(3), pages 317-345.
  7. 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.
  8. Pete Klenow & Gunjan Sharma & Albert Bollard, 2011. "India's Mysterious Manufacturing Miracle," 2011 Meeting Papers 1176, Society for Economic Dynamics.
  9. 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.
  10. Albert Bollard & Peter Klenow & Gunjan Sharma, 2012. "Online Appendix to "India's Mysterious Manufacturing Miracle"," Technical Appendices 11-75, Review of Economic Dynamics.
  11. 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.

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