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Rapid Economic Growth with Increasing Returns to Scale and Little or No Productivity Growth

  • Park, Seung-Rok
  • Kwon, Jene K
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    Total factor productivities for 28 Korean manufacturing sectors were estimated jointly with markups, scale economies, and the capacity utilization rate using the short-run generalized Leontief cost function. Concavity conditions necessary for the cost function to be well-behaved and consistent with a firm's optimizing behavior were imposed on the estimation by way of Bayesian inference. The study finds: (1) the superiority of the short-run equilibrium model over the long-run model and of the short-run generalized Leontief cost function over the translog cost function; (2) market imperfection; (3) the existence of scale economies; and (4) biases in the traditional TFP measures. The study also suggests that a rapid growth of output is possible with negative TFP growth. Copyright 1995 by MIT Press.

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    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 77 (1995)
    Issue (Month): 2 (May)
    Pages: 332-51

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    Handle: RePEc:tpr:restat:v:77:y:1995:i:2:p:332-51
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