Calculation of total factor productivity growth

Reference no: EM1314004

In a paper called the 'The Tyranny of Numbers', Alwyn Young calculated input growth and 'elasticity (the elasticity of output with respect to each input) for the four fastest growing Asian economies (the East Asian Tigers). Each growth rate is an average annual growth rate. The elasticity's are the elasticity of output with respect to capital, i.e. the percentage change in output with respect to a 1% change in capital (column 4), and the elasticity of output with respect to labour, i.e. the percentage change in output with respect to a 1% change in labour (last column).

Country	Output Growth	Capital Growth	Capital Elasticity	Labour Growth	Labour Elasticity
Hong Kong	7.30%	8.00%	0.372	3.20%	0.628
Singapore	8.70%	11.50%	0.491	5.70%	0.509
South Korea	10.30%	13.70%	0.297	6.40%	0.703
Taiwan	9.40%	12.30%	0.257	4.90%	0.743

a. Calculate total factor productivity growth (our measure of technological progress) for each country using the growth accounting framework discussed in class.

b. Compare output growth and total factor productivity growth for each country, with special attention to Singapore. Does Singapore look different than the other countries?

c. Now look at Singapore's capital elasticity compared to the other three countries. Do you think that Singapore's production is more or less 'capital intensive than the other countries? (That is, does production in Singapore tend to use a higher or lower share of capital compared to the other countries.)

d. All three countries had very high output growth, but after examining the components of growth, how would you explain Singapore's rapid growth compared to the growth in Hong Kong, South Korea and Taiwan over this period?

Reference no: EM1314004

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