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Some methodological problems with the neoclassical analysis of the East Asian miracle

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  • Jesus Felipe
  • J. S. L. McCombie

Abstract

This paper discusses the recent controversy over the sources of economic growth in East Asia. This empirical work has either used growth accounting or estimated econometrically aggregate production functions. It is shown that it is possible to approximate the value-added accounting identity (i.e., value added equals labour's compensation plus total profits) by a mathematical expression that has all the properties of a well-behaved neoclassical aggregate production function. This implies that statistical estimations of putative aggregate production functions can provide no independent evidence as to whether they accurately describe the production technology of the economy or, indeed, whether the aggregate production function actually exists. A corollary is that the conventional measures of the growth of total factor productivity cannot be unambiguously interpreted as an estimate of the rate of technical progress. The paper reviews the works of Kim and Lau and Young and, in the light of this, explains why both analyses and interpretations of the notion of total factor productivity growth as the rate of technical progress are problematical. Copyright 2003, Oxford University Press.

Suggested Citation

  • Jesus Felipe & J. S. L. McCombie, 2003. "Some methodological problems with the neoclassical analysis of the East Asian miracle," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(5), pages 695-721, September.
    • Handle: RePEc:oup:cambje:v:27:y:2003:i:5:p:695-721
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    Cited by:

    1. Deb Kusum Das & Abdul Azeez Erumban & Jagannath Mallick, 2021. "Economic Growth In India During 1950–2015: Nehruvian Socialism To Market Capitalism," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 926-951, July.
    2. Jesus Felipe & John S. L. McCombie, 2007. "Is A Theory Of Total Factor Productivity Really Needed?," Metroeconomica, Wiley Blackwell, vol. 58(1), pages 195-229, February.
    3. Yongbok Jeon & Tae Hwan Yoo, 2009. "Regional Growth and Income Inequality in China After 1978: A Spatial Econometric Approach," Korean Economic Review, Korean Economic Association, vol. 25, pages 105-131.
    4. Bruno Carballa Smichowski & Cédric Durand & Steven Knauss, 2021. "Participation in global value chains and varieties of development patterns," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 45(2), pages 271-294.
    5. Javier López-Bernardo & Félix López-Martínez & Engelbert Stockhammer, 2016. "A Post-Keynesian Response to Piketty's ‘Fundamental Contradiction of Capitalism’," Review of Political Economy, Taylor & Francis Journals, vol. 28(2), pages 190-204, April.
    6. Naubahar Sharif & Can Huang, 2009. "Cross-border Investment and Economic Integration: The Case of Guangdong Province and Hong Kong SAR," Chapters, in: Wilfred Dolfsma & Geert Duysters & Ionara Costa (ed.), Multinationals and Emerging Economies, chapter 6, Edward Elgar Publishing.
    7. David Kiefer & Ivan Mendieta-Muñoz & Codrina Rada & Rudiger von Arnim, 2020. "Secular Stagnation and Income Distribution Dynamics," Review of Radical Political Economics, Union for Radical Political Economics, vol. 52(2), pages 189-207, June.
    8. Ajit Karnik & Mala Lalvani, 2012. "Growth performance of Indian states," Empirical Economics, Springer, vol. 42(1), pages 235-259, February.
    9. Jesus Felipe & Carsten Holz, 2001. "Why do Aggregate Production Functions Work? Fisher's simulations, Shaikh's identity and some new results," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 261-285.
    10. Jesus Felipe & John McCombie, 2006. "The Tyranny of the Identity: Growth Accounting Revisited," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 283-299.
    11. Lee, Velma & Viale, Ariel M., 2023. "Total factor productivity in East Asia under ambiguity," Economic Modelling, Elsevier, vol. 121(C).
    12. Justin Polchlopek, 2011. "Medical Expenditure Growth and the Diffusion of Medical Technology," Working Paper Series, Department of Economics, University of Utah 2011_10, University of Utah, Department of Economics.
    13. Bruno Carballa Smichowski & Cédric Durand & Steven Knauss, 2016. "Uneven development patterns in global value chains," CEPN Working Papers hal-01368948, HAL.
    14. Felipe, J., 2003. "Sustainable development: a comment," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 21, pages 575-581, December.
    15. Wang, Zijian & Wei, Jiegen, 2004. "Structural Change, Capital’s Contribution, and Economic Efficiency: Sources of China’s Economic Growth Between 1952-1998," Working Papers in Economics 130, University of Gothenburg, Department of Economics, revised 05 Apr 2004.
    16. Joko Mariyono, 2018. "Decomposition total factor productivity of Indonesian rice production," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(2), pages 121-127, Oktober.
    17. Jesus Felipe & John S.L. McCombie, 2013. "The Aggregate Production Function and the Measurement of Technical Change," Books, Edward Elgar Publishing, number 1975.
    18. Jo Michell, 2014. "Factors generating and transmitting the financial crisis; Functional distribution of income," Working papers wpaper41, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    19. Vladimir Benacek & Jiri Podpiera & Ladislav Prokop, 2005. "Determining Factors of Czech Foreign Trade: A Cross-Section Time Series Perspective," Working Papers 2005/03, Czech National Bank.
    20. Jesus Felipe & J. S. L. McCombie, 2002. "A Problem with Some Estimations and Interpretations of the Mark-up in Manufacturing Industry," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(2), pages 187-215.
    21. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 208-262, May.
    22. Piotr Pietraszewski, 2016. "Microeconomic fundamentals of the aggregate production function with constant returns to scale," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 45.
    23. Anwar Shaikh, 2012. "Rethinking Microeconomics: A Proposed Reconstruction," Working Papers 1206, New School for Social Research, Department of Economics.

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