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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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16043.

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Date of creation: Jun 2010
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Publication status: published as John Fernald & Brent Neiman, 2011. "Growth Accounting with Misallocation: Or, Doing Less with More in Singapore," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(2), pages 29-74, April.
Handle: RePEc:nbr:nberwo:16043

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Cited by:
  1. 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, Taylor & Francis Journals, vol. 19(3), pages 317-345.
  2. 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.
  3. Areendam Chanda & Bibhudutta Panda, . "Productivity Growth in Goods and Services Across The Heterogeneous States of America," Departmental Working Papers, Department of Economics, Louisiana State University 2014-10, Department of Economics, Louisiana State University.
  4. 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.
  5. Gita Gopinath & Brent Neiman, 2014. "Trade Adjustment and Productivity in Large Crises," American Economic Review, American Economic Association, American Economic Association, vol. 104(3), pages 793-831, March.
  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. Pete Klenow & Gunjan Sharma & Albert Bollard, 2011. "India's Mysterious Manufacturing Miracle," 2011 Meeting Papers 1176, Society for Economic Dynamics.
  8. Loukas Karabarbounis & Brent Neiman, 2013. "The Global Decline of the Labor Share," NBER Working Papers 19136, National Bureau of Economic Research, Inc.
  9. Albert Bollard & Peter Klenow & Gunjan Sharma, 2012. "Online Appendix to "India's Mysterious Manufacturing Miracle"," Technical Appendices 11-75, Review of Economic Dynamics.
  10. Hyeok Jeong & Robert M. Townsend, 2005. "Sources of TFP Growth: Occupational Choice and Financial Deepening," IEPR Working Papers, Institute of Economic Policy Research (IEPR) 05.28, Institute of Economic Policy Research (IEPR), revised May 2005.
  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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