The determinants of economic growth a case study of six southeast asian countries

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ISS-INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM-NETHERLANDS PROGRAMME FOR MASTER’S DEGREE IN DEVELOPMENT ECONOMICS THE DETERMINANTS OF ECONOMIC GROWTH: A CASE STUDY OF SIX SOUTHEAST ASIAN COUNTRIES SUPERVISOR : PRESENTED BY : DR NGUYỄN MINH ĐỨC NGUYỄN KIỀU GIANG MDE-K16 HO CHI MINH CITY, DECEMBER 2012 ACKNOWLEDGMENT I’ve experienced the great time in this course with acquire academic knowledge, open-mind to approach new things, and be straightforward to express ideas I’ve guided by open-mind lecturers who always encourage us to express our opinions and discuss it This is really quality and extensive course We’re encouraged to be ourselves and be self-confident to discuss ideas, it’s really meaningful thing Sincerely, I would like to take this opportunity to express my honest thanks to the Vietnam-Netherlands Master Program for Economics of Development for the interesting and extensive curriculum, as well as sincere thanks to all of people who engage in this course such as management board of this program, lecturers, tutors To fulfill this course, I’ve received the help and support from many people such as director and vice director of this program, lecturers, tutors, my supervisor, classmates, friends, course administrators, librarians of MDE & Fulbright, and other people who give me the instructions, comments, advices, supports, sympathies, and encouragement during the course process Without these things, I could not fulfill the Thesis and finish the course First of all, I would like to express my gratitude to my supervisor – Dr Nguyen Minh Duc, who always remind me to finish the Thesis timely and make me determine to finish the Thesis with high effort, very patient and sympathy with me for delaying the time of submitting Thesis, spent his valuable time to help me, give comments and correct the Thesis mistake by mistake From bottom of my heart, I sincerely thank him for all I would like to express my special thank to Dr Nguyen Trong Hoai - Director of the Program, Vice Principal of UEH He fosters us to study and finish the course actively and efficiently, take care of us step by step And special thanks to Dr Pham Khanh Nam steps with us to overcome obstacles in thesis process honestly, give us the valuable advices and encouragement to finish the thesis i Thanks to TRD board defense give me valuable comments and advices to continue this topic Thanks to Dr Phan Minh Ngoc supplies me materials at my TRD time Thanks to Dr Le Dinh Truc gives me valuable comments and advice on panel technique in Eview And thanks to tutor Phung Thanh Binh for helping us honestly in the course Thanks to all classmates in MDE-K16, all of you support me unconditionally with discussions, talks, shared materials, team working playing, and other Thanks to friends Thu Huyen and Thanh Tien, your sharing materials are very useful for me Hope all of you fulfill this course and get success in your life Lastly, I would like to thank to my dear family, warm friends that supports and sympathies with me for spending most time on studying this course Thanks all for all, hope you will be happy and successful in life I pledge to take full responsibilities for mistakes, errors, omissions and shortcomings of the study ii ABTRACT This study based on the neoclassical growth theory, an extended version of this model As common trend, Cobb-Douglas production function is used to evaluate the robustness of determinants of economic growth in a dataset of six Southeast Asian countries from 1993 to 2009 The fixed effect model (FEM) is used to estimate this model The results indicate that the most important source of economic growth of these countries is capital accumulation and labor Keywords: Economic growth, determinants, Capital, Labor, Population growth, Government expenditure, Southeast Asian countries, Neoclassical Model, CobbDouglas production function, FEM iii TABLE OF CONTENT CHAPTER 1: INTRODUCTION 1.1 Problem statement 1.2 Research structure CHAPTER 2: RESEARCH OBJECTIVES & RESEARCH QUESTIONS 2.1 Research objectives 2.2 Research questions 2.3 Research scope 2.4 Research contribution CHAPTER 3: LITERATURE REVIEW 3.1 General Overview 3.1.1 Concept and Definitions 3.1.2 Traditional methods of examine determinants of economic growth 13 3.1.3 Measurement indicator group of development and growth 14 3.1.4 Overview of economic development theory 15 3.1.4.1 Classify theories by time 15 Classical theory Neoclassical model Endogenous Theory 3.1.4.2 Classify theory by four main classes 21 Linear stages of growth theory Structural change theory International dependence theory Neoclassical counter revolution theory 3.2 Theoretical Framework 26 3.2.1 Production function Cobb-Douglas 26 3.2.2 Harrod-Domar Growth Model 28 3.2.3 Neoclassical model-Solow model 29 3.2.4 Capital Fundamentalism 30 iv 3.3 Empirical Review 30 3.3.1 Development and growth of Vietnam and Southeast Asia 30 3.3.2 Review the empirical studies 33 CHAPTER 4: RESEARCH METHODOLOGY 39 4.1 Analyzed Framework 39 4.1.1 Model 1- Traditional neoclassical model 39 4.1.2 Model 2- Extend neoclassical model 40 4.1.3 FEM is selection for estimation 40 4.2 Variables 44 4.2.1 Dependent variable: GDP per capita 44 4.2.2 Independent variables 44 4.3 Data Description - Data collection – Data analysis 50 CHAPTER 5: DATA ANALYSIS AND DISCUSSION 52 5.1 Descriptive Statistics Analysis 52 5.1.1 Descriptive Statistics 5.1.2 Correlation Matrix 54 5.2 Econometric Analysis 54 5.2.1 Whether FEM or REM is more suitable 54 5.2.2 Model – Traditional model 58 5.2.3 Model - The Extened Neoclassical Model 59 5.3 The limitations of data, and modeling techniques 61 CHAPTER 6: CONCLUSION AND POLICY RECOMMENDATION 63 6.1 Main findings 63 6.2 Managerial Implications and Policies 64 6.3 Limitations and future research 65 REFERENCE 67 APPENDICES 71 v APPENDICES A: Data of GDP, Capital, Population growth, Labor, Government expenditure 70 B: Descriptive statistics of each country 77 C: Correlation Matrixes of each country 79 D: Residual Graph 81 E: Regression Results 82 F: Main Empirical studies Summary 92 E: Regression results 81 vi LIST OF TABLES Table 3.1: Sources of Growth in East Asia, by Country and Period 37 Table 4.1 Estimated Capital-Output ratio some Asian Countries 1980 45 Table 4.2 Range forecast of COR for countries 46 Table 4.3 Summary of variable 49 Table 5.1 Sample observations - Descriptive statistics - sample: 1993 2009 54 Table 5.2 Correlation on the sample observations 54 Table 5.3 Model - A comparison of results with FEM 55 Table 5.4 HAUSMAN TEST for MODEL 55 Table 5.5 Model - A comparison of results with FEM 57 Table 5.6 HAUSMAN TEST for MODEL 57 Table 5.7 Estimated results for FEM with tradition model (Model 1) 58 Table 5.8 Estimated results for FEM with extended model (Model 2) 60 vii LIST OF FIGURES Figure 3.1: Population of 1993 of countries Figure 3.2: Population of 2009 of countries Figure 3.3: GDP per capita of 1993 of countries 10 Figure 3.4: GDP per capita of 2009 of countries 10 Figure 4.1: Conceptual Framework of the study 39 Figure 5.1: GDP per capita of countries for the period of 1993-2009 52 Figure 5.2: Capital per capita GDP per capita for the period of 1993-2009 53 Figure 6.1: An overview of determinants of economic growth of countries 64 viii ABBREVIATIONS COR : Capital output ratio DCs : Developed (high-income) countries FEM : The fixed effects method GCF : Gross Capital Formation GFCF : Gross fixed assets formation GDP : Gross Domestic Product ICOR : Incremental capital output ratio LDCs : Less developing countries LICs : Low-income countries LSDV : The least-squares dummy variable OLS : Ordinary Least Square PCI : Province Competitiveness Index REM : Random Effect Model ix  Log(gdp_sg/labor_sg) = 0.91 + 2.88 + 0.58*Log(capital01_sg/labor_sg) 0.025*lLog(pop_growth_sg) + 0.61*govexp_gdp_sg Table E.8: FEM Regression Result of Model – Extended model, Capital Series No.2 Dependent Variable: LOG(GDP?/LABOR?) Method: Pooled EGLS (Cross-section SUR) Sample: 1993 2009 Included observations: 17 - Cross-sections included: Total pool (balanced) observations: 102 Linear estimation after one-step weighting matrix Cross-section SUR (PCSE) standard errors & covariance (d.f corrected) Variable Coefficient Std Error t-Statistic Prob C LOG(CAPITAL02?/LABOR?) LOG(POP_GROWTH?) GOVEXP_GDP? Fixed Effects (Cross) _VN—C _TL—C _IN—C _PH—C _MA—C _SG—C 4.247387 0.468949 0.012514 -0.047431 0.033777 0.005052 0.010204 0.152869 125.7477 92.82679 1.226370 -0.310276 0.0000 0.0000 0.2232 0.7570 -0.776387 -0.234902 -0.334493 -0.269033 0.461306 1.153510 Effects Specification Cross-section fixed (dummy variables) Weighted Statistics R-squared Adjusted R-squared S.E of regression F-statistic Prob(F-statistic) 0.999840 0.999826 1.041327 72730.10 0.000000 Mean dependent var S.D dependent var Sum squared resid Durbin-Watson stat -113.8130 367.8510 100.8457 1.117863 Unweighted Statistics R-squared Sum squared resid 0.997684 0.362106 Mean dependent var Durbin-Watson stat 87 8.518719 0.352677 * REM Regression Results Table E.9: REM Regression Result of Model – Traditional model, Capital Series No.1 Dependent Variable: LOG(GDP?/LABOR?) Method: Pooled EGLS (Cross-section random effects) Sample: 1993 2009 Included observations: 17 Cross-sections included: Total pool (balanced) observations: 102 Wansbeek and Kapteyn estimator of component variances Variable Coefficient Std Error t-Statistic Prob C LOG(CAPITAL01?/LABOR?) Random Effects (Cross) _VN C _TL C _IN C _PH C _MA C _SG C 2.715650 0.617873 0.398866 0.036235 6.808434 17.05201 0.0000 0.0000 -0.455981 -0.342186 -0.239890 -0.129791 0.338448 0.829400 Effects Specification S.D Cross-section random Idiosyncratic random 0.509268 0.073753 Rho 0.9795 0.0205 Weighted Statistics R-squared Adjusted R-squared S.E of regression F-statistic Prob(F-statistic) 0.744396 0.741840 0.073695 291.2305 0.000000 Mean dependent var S.D dependent var Sum squared resid Durbin-Watson stat 0.299031 0.145042 0.543095 0.246952 Unweighted Statistics R-squared Sum squared resid 0.865715 20.99984 Mean dependent var Durbin-Watson stat 88 8.518719 0.006387 Table E.10: REM Regression Result of Model – Traditional model, Capital Series No.2 Dependent Variable: LOG(GDP?/LABOR?) Method: Pooled EGLS (Cross-section random effects) Date: 11/28/12 Time: 08:48 Sample: 1993 2009 Included observations: 17 Cross-sections included: Total pool (balanced) observations: 102 Swamy and Arora estimator of component variances Cross-section SUR (PCSE) standard errors & covariance (no d.f Correction) Variable Coefficient Std Error t-Statistic Prob C LOG(CAPITAL02?/LABOR?) Random Effects (Cross) _VN C _TL C _IN C _PH C _MA C _SG C 3.744019 0.517358 0.335302 0.032753 11.16612 15.79582 0.0000 0.0000 -0.685629 -0.254360 -0.300456 -0.224779 0.420695 1.044529 Effects Specification S.D Cross-section random Idiosyncratic random 0.206116 0.061733 Rho 0.9177 0.0823 Weighted Statistics R-squared Adjusted R-squared S.E of regression F-statistic Prob(F-statistic) 0.797024 0.794994 0.074646 392.6683 0.000000 Mean dependent var S.D dependent var Sum squared resid Durbin-Watson stat 0.617178 0.164862 0.557197 0.236007 Unweighted Statistics R-squared Sum squared resid 0.784037 33.77294 Mean dependent var Durbin-Watson stat 89 8.518719 0.003894 Table E.11: REM Regression Result of Model – Extended model, Capital Series No.1 Dependent Variable: LOG(GDP?/LABOR?) Method: Pooled EGLS (Cross-section random effects) Sample: 1993 2009 Included observations: 17 - Cross-sections included: Total pool (balanced) observations: 102 Wansbeek and Kapteyn estimator of component variances Variable Coefficient Std Error t-Statistic Prob C LOG(CAPITAL01?/LABOR?) GOVEXP_GDP? LOG(POP_GROWTH?) Random Effects (Cross) _VN C _TL—C _IN—C _PH—C _MA—C _SG—C 2.656089 0.607836 0.890469 -0.015914 0.425831 0.043771 0.855253 0.039787 6.237418 13.88688 1.041177 -0.399966 0.0000 0.0000 0.3004 0.6901 -0.448404 -0.364902 -0.231585 -0.147043 0.339061 0.852874 Effects Specification S.D Cross-section random Idiosyncratic random 0.534936 0.073635 Rho 0.9814 0.0186 Weighted Statistics R-squared Adjusted R-squared S.E of regression F-statistic Prob(F-statistic) 0.748450 0.740749 0.073531 97.19484 0.000000 Mean dependent var S.D dependent var Sum squared resid Durbin-Watson stat 0.284242 0.144414 0.529863 0.284281 Unweighted Statistics R-squared Sum squared resid 0.860377 21.83469 Mean dependent var Durbin-Watson stat 90 8.518719 0.006899 Table E.12: REM Regression Result of Model – Extended model, Capital Series No.2 Dependent Variable: LOG(GDP?/LABOR?) Method: Pooled EGLS (Cross-section random effects) Sample: 1993 2009 Included observations: 17 Cross-sections included: Total pool (balanced) observations: 102 Wansbeek and Kapteyn estimator of component variances Variable Coefficient Std Error t-Statistic Prob C LOG(CAPITAL02?/LABOR?) Random Effects (Cross) _VN—C _TL—C _IN—C _PH—C _MA—C _SG—C 4.179636 0.470157 0.353900 0.022771 11.81023 20.64753 0.0000 0.0000 -0.773605 -0.243428 -0.334809 -0.265479 0.463174 1.154147 Effects Specification S.D Cross-section random Idiosyncratic random 0.697328 0.061733 Rho 0.9922 0.0078 Weighted Statistics R-squared Adjusted R-squared S.E of regression F-statistic Prob(F-statistic) 0.810062 0.808163 0.061720 426.4885 0.000000 Mean dependent var S.D dependent var Sum squared resid Durbin-Watson stat 0.182863 0.140917 0.380941 0.341203 Unweighted Statistics R-squared Sum squared resid 0.737973 40.97664 Mean dependent var Durbin-Watson stat 91 8.518719 0.003172 APPENDIX F: Main Empirical Studies Summary Table F.1: Main Empirical Studies Summary Ord No Authors Objectives Countries Period Type data & model Growth accounting framework with the production function Dependent variable TFP Independent variable - Demand intensity - Education and training - Capital structure - Technical progress - Economic restructuring Ab Wahab Muhamad (2004), “Total Factor Productivity Growth Survey Report-Malaysia” P210-232 TFP growth and its sources in the Malaysian economy from 1981 to 2001; identify the factors affecting TFP growth at the national level Malaysia 1981-2001 Achara Chandrachai & Tubtimtong Bangorn & Kanjana Chockpisansin (2004), “Total Factor Productivity Growth Survey Report-Thailand”, p297-321 Calculate the TFP from the energy crisis (1977-81), beginning of the expansion period (1982-86), boom period (1987-91), declining period (1992-96), and recession period after the financial crisis (1997-99) Thailand 1977-1999 Growth accounting method TFP growth - Growth of openness - growth of labor in the non-agriculture sector - ratio of FDI to gross fixed capital formation Caesar B Cororaton (2004), “Total Factor Productivity Growth Survey Report-Philippines, - Quantify TFP growth and its contribution to overall economic growth - understand the Philippines 1967-2000 Growth accounting TFP growth - Export - Import - FDI - R&D - Price change - Share of 92 Result - The growth rate of GDP was 6.6% from 1991 to 2001 - Annual employment growth of 1.9% - Capital stock growth of 3.1% - TFP growth was 1.5% per annum Mainly due to demand intensity which contributed 35.5%, followed by education and training (34.3%), capital structure (15.1%), technical progress (13.9%), and economic restructuring (1.2%) - The economic growth increased continuously since 1977 except during financial crisis in 19971999 - 1977-1986: main source of economic growth was the expansion of capital and labor - 1987-1999: main contribution to the economic growth came from capital - TFP growth played a very insignificant role in the contribution to growth - Mostly negative TFP - The contribution of TFP growth to economic growth consistently improved from -4.26% in the mid1980s to +0.93% in 1998-2000 p-255-279 Laurits R Christensen, Dianne Cummings, and Dale W Jorgenson 1980 “Economic Growth, 1947-73; An International Comparison” Le Thanh Nghiep, Huu Quy (2000) “Impact Of DoiMoi” possible factors that might have caused changes in TFP growth - International comparison of postwar patterns of aggregate economic growth - Assess the role of growth in real capital input and in real labor input in accounting for aggregate economic growth The effect of Doi Moi on Vietnam's GDP manufacturing countries: United States, Canada, France, Germany, Italy, Japan, Korea, the Netherland s, and the United Kingdom 1947-1973 Production function Real Production output - Real Capital input - Real Labor input - total factor productivity - Times Vietnam 1986-1998 Production function Economic growth - Capital stock - technical progress - “Doi moi” 93 - Our principal finding is that differences in growth rates of real product in 1960-73 are associated with differences in growth rates of real factor input Increases and decreases in growth rates of real product are associated with increases and decreases in growth rates of real factor input - That very rapid growth of real product is associated with rapid growth of both real capital input and real labor input, and that slow growth of real product is associated with slow growth of both inputs - Moderate growth of real product can be associated with rapid growth of real capital input, rapid growth of real labor input, or moderate rates of growth of both inputs - Doi Moi appeared to have a significant positive effect on productivity, which by 1998 accounted for a 42% increase in GDP - Financial crisis exerted a strong negative impact on the economic growth about 3.6% in 1998 - High GDP growth in 1990s could be explained mostly by increase in investment and improvement of productivity under the Doi Moi N Gregory Mankiw, David Romer and David N Weil (1992) “A contribution to empirics of economic growth” Nombulelo Duma (2007) “Sri Lanka's Sources of Growth” Phan Minh Ngoc (2006) “The Role of Capital and Technological Progress in Vietnam’s Economic Growth” - Examines whether the Solow growth model is consistent with the international variation in the standard of living - Examines implications of Solow model for convergence in standards of living: whether poor countries tend to grow faster than rich countries Assess Sri Lanka’s sources of growth 121 countries 1960-1985 Production function with cross-country data Economic growth - Capital stock - Human capital - Labors Sri Lanka 1980-2006 Growth accounting framework Economic growth - Capital stock - Labor force - Human capital - TFP Measure the contribution of Capital, Labor and Technological Progress to Economic Growth Vietnam 1975-2005 Production function Economic growth - Physical capital - Labor - Technology progress 94 - Solow model is consistent with the int’ evidences if one acknowledge the important of human as well as physical capital These three variables explain most ofnt’s variation - holding population growth and - Solow model that includes accumulation of human as well as physical capital provides an excellent description of the crosscountry data - Accumulation of capital stock has a larger impact on income per capita than Solow model implies in textbook - Labor was the dominant factor contributing to growth in the 1980s; later, TFP took over as the main contributor - A higher growth path over the medium term will depend on securing a stable political and macroeconomic environment; implementing structural reforms necessary to improve productivity and efficiency of investment; attaining fiscal consolidation; and creating space for the private sector - Capital is main factor contributes to economic growth account for 85% for economic growth - Technology progress seem absent in growth Phan Minh Ngoc (2007), “Sources of Vietnam’s Economic Growth” 10 Rober J Barro, 1988 “Government Spending in a Simple Model of Endogenous Growth” Robert J Barro, 1989 “A cross - country study of growth, saving and government” 11 12 Robert J Barro, 1994 “Democracy and Growth” - Measures the contribution of capital formation, labor, and technological progress to the economic growth - The impact of Doimoi on economic growth Figure out relation between growth rate GDP per capita & government consumption expenditure per GDP Vietnam 1975-2003 Production function Economic growth - Physical capital - Labor - Technology progress - Doi moi - The most important source of economic growth is capital accumulation - Technological progress was statistically absent in the growth Extended Endogenous economic growth Economic growth - Government Consumption Services ( that not enter into households' production functions - Per capita growth - Investment in physical - Human capital - Population growth - Government expenditures - Maintenance of the rule of law - Free markets, small government consumption, - Human capital - Initial Level of GDP - Initial Level of Human Capital, - Educational spending, Expected sign is negative relation between grow rate of GDP per capita and level of government consumption expenditure per GDP 120 countries 1960-1985 Models of endogenous for Data across countries Economic growth 100 countries 1960-1990 Panel data Economic growth 95 Public investment tends to be positively correlated with growth and private investment, property rights affect growth, strong negative interaction between population growth and investment in human capital - Democracy is not the key to economic growth, it enhances growth at low levels of political freedom but depresses growth when a moderate level of freedom has already been attained Democracy on growth is weak negative - Political freedoms tend to erode over time if they are out of line with a country's standard of living Improvements in the standard of living substantially raise the - Fertility Rate, - Government Consumption - Investment Ratio - Terms of Trade - Democracy 13 Robert J Barro & Jong Wha Lee, 1993 “Losers and Winners in Economic Growth” Sources of growth 14 Robert J Barro (1996)“Determinants of Economic GrowthA Cross-Country Empirical Study” Measure the contribution of factor to Economic Growth 116 countries 100 countries 1965-1985 Panel data Economic growth 1960-1990 Panel dataset, Neoclassical model Economic growth 96 probability that political freedoms will grow - If economic freedom can be established in a poor country, growth would be encouraged & the country would tend eventually to become more democratic on its own - Ratio investment - A country growth faster if begin per GDP with lower GDP per capita relative - Ratio Government to initial level of human capital consumption to - Positive effective on growth: GDP Investment per GDP, Life- Black-market expectancy, premium - Negative effective on growth: - Initial GDP large government, Black-market - Male secondary premium, revolutions school - Female education has negative - Female secondary effect on fertility school - Male attainment has positive - Life- Expectancy effect on primary school - Revolution enrollment - Female and male attainment have positive effect on life expectancy, negative on infant mortality, positive on enrollment at second and higher levels - Initial_GDP level - Growth rate will get higher with - Male seocondary higher initial schooling, higher life & HighSchool expectancy, lower fertility, better - Life Expectancy maintenance of rule of law, lower - Fertility rate inflation, terms of trade - Government improvement, and lower Consumption to government consumption, lower GDP Ratio initial level of real GDP per capita - Rule of Law Index 15 Robert J Barro, 2001 “Economic Growth in East Asia Before and After the Financial Crisis” One objective is to assess whether the Asian financial crisis had a long lasting effect on growth prospects and other dimensions of economic performance for the two groups of Asian economies 10 economies: Indonesia, Malaysia, South Korea, The Philippines , Thailand, China, Hong Kong, Japan, Singapore, Taiwan 1960-2000 Panel analysis focuses on the immediate and long-term effects of the Asian financial crisis on economic performance in east Asia Economic growth 16 Shandre Mugan Thangavelu (2004), ”Total Factor Productivity Growth Survey Report-Singapore” The importance of productivity growth will be an important component of longterm growth in the East and Southeast Asian countries as they structurally adjust toward higher value-added production Singapore 1971-1998 Baseline model TFP growth 17 Susan M Collins and Barry Establishing which as below is correct East Asia countries: 1960-1994 The neoclassical Economic growth 97 - Term of trade Change - Democracy Index - Inflation rate - Investment Ratios for real investment (private plus public) relative to real GDP - Stock-Market Prices: computed by converting local currency values of stock-market indexes to U.S dollars and then dividing by a measure of the U.S price level - FDI to GDP ratio - Government expenditure on education - share of foreign equity ownership - share of exports to GDP - Physical capital - Human capital - The Asian financial crisis was associated with a sharp reduction of economic growth in east Asia - Currency and banking crises with contemporaneously reduced values of economic growth and investment - Rates of economic growth in east Asia have rebounded in 1999-2000, but the permanence of this recovery is uncertain crisis had a long-term adverse effect - Labor quality in terms of skilled workers improves TFP growth - The key component of the longterm growth in the Singaporean economy is the quality of education of the labor force: skill and education forms an important component - The negative relationship between capital accumulation and TFP growth, thus suggest that must be sufficient "gestation" or "learningby-doing" effects in the economy before there are signs of positive TFP growth - Physical capital contribute most - Next to TFP on average, then to P.Bosworth (1996) ”Economic Growth in East AsiaAccumulation versus Assimilation” is a crucial first step in extracting appropriate lessons from East Asian growth experiences: (1) Asian growth the maintenance of high rates of physical and human capital accumulation over a number of decades a willingness to make the sacrifices of current consumption necessary to invest for the future? (2) Or has the key been the less costly approach of adopting existing technologies from more advanced economies, which may be associated with increased capital accumulation along the way? Indonesia, Malaysia, Philippines ,Singapore, Thailand, Taiwan, Korea with production function 98 - TFP Human capital - Philippines: TFP have negative effect on growth in most times 18 Svetlana Ledyaeva and Mikael Linden, 2008 “Determinants of Economic Growth: Empirical Evidence from Russian Regions” 19 Tran Tho Dat (2004) “Total Factor Productivity Growth Survey Report-Vietnam”, P322-350 20 Yan Wang, Yudong Yao 74 Russian regions; Utilize both panel and crosssectional data 1996-2005 focuses mainly on TFP and its determinants Vietnam 1986-2000 - Investigating the determinants of China 1952-1999 Dynamic Panel data examined empirically determinants of short-run economic growth in Russian regions 19962004; modified Barro Sala-IMartin empirical framework for the neoclassical production function model Growth accounting framework based upon an aggregate production function Economic growth - Natural logarithm of per capita domestic investment - Natural logarithm of per capita export - Natural logarithm of resource index - Natural logarithm of per capita FDI TFP - Human capital - Technology Growth accounting Economic growth - Human capital - TFP 99 - Initial conditions (conditional convergence), domestic investment and exports are the most important ones for stimulating economic growth in Russia - Natural resource not contributed significantly, although the Russian economy is traditionally considered to rely heavily on natural resources - Export-led growth seems to be important in Russia during transition - FDI seems not to be important as a growth determinant in Russia FDI has positive effect on economic growth while in high-income regions it has negative effect - To achieve sustainable growth, the economy needs a second wave of reforms concentrating on greater improvement in efficiency rather than on more inputs - Efficiency growth has greatly contributed to GDP growth In addition, labor productivity suggest the sustainable nature of economic growth in Vietnam - (1) labor reallocation in economic restructuring can greatly improve overall productivity; - (2) Combination of FDI and absorption capacity of the economy plays an important role in efficiency gains - The contribution of physical capital is the most important source (2001) “Sources of China's economic growth, 1952-99incorporating human capital accumulation” China's growth - Shed light on the relative importance of factor accumulation (physical capital, labor and human capital) versus the growth of TFP framework - The End - 100 of output growth, with a 56.8% share for the pre-reforrn period, with a 48.3% share for the reform period - The accumulation of human capita was quite rapid and contributed significantly to growth and welfare, but declined significantly in the reform period in 1978-99 - The growth of TFP still plays positive and significant role during the reform period, but the negative productivity growth during the prereform period 1952-1977 101 ... macro factors such as financial capital, labor, etc… to economic growth of some Southeast Asian countries including Vietnam, Indonesia, Malaysia, the Philippine, Singapore and Thailand through the. .. the detailed richness origin of Southeast Asian countries It just would like to present a general views for the trend of economic growth of Southeast Asian territories, and examines determinants. .. consider capital accumulation as the engine of growth On the other hand, new theories state that basic determinant of investment (on physical and human capital) is the wave of innovation in the economy