Rapid Economic Growth with Increasing Returns to Scale and Little or No Productivity Growth
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.
Volume (Year): 77 (1995)
Issue (Month): 2 (May)
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