Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 22, No. 1, pp.55-75
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2009
Received 13 Nov 2008 Revised 29 Jan 2009

Empirical Evidence on the Determinants of TFP and Its Role in the Growth of Innovation-Driven Economies

Kim Hag-Soo
Research Fellow, Korea Economic Research Institute, 8th Fl., HanaDaetoo Securities Bldg., 27-3, Yoido-Dong, Yongdungpo-Gu, Seoul 150-705, Korea, Tel: +82-2-3771-0022, Fax: +82-2-785-0273 hskim67@keri.org

JEL Classification: O30, O43, O47

Abstract

This paper provides some empirical evidence for R&D stock, openness, and economic freedom that foster the growth of TFP. However, it finds no empirical evidence for markup price and nonconstant returns to scale, implying the growth rate of TFP measured as the Solow residual reflects the true productivity growth. In addition, it also suggests empirical evidence for the enlarged role of TFP in the growth of innovation-driven economies by exploring two dynamic panel models specifying the relationship among TFP, investment, and employment. Based on these main findings, I suggest a few policy implications for Korea to fully utilize the role of TFP in the growth of the Korean economy that is transitioning to or has already transitioned to an innovation-driven economy.

Keywords:

Total factor productivity ( TFP), Growth, R&D, Openness, Economic freedom

Acknowledgments

Paper presented at the 16th Seoul Journal of Economics International Symposium held at Seoul National University, Seoul, 27 November 2008.

References

  • Abramovitz, M. “Resource and Output Trends in the United States since 1870.” American Economic Review 46 (No. 2 1956): 5-23.
  • Arellano, M., and Bond, S. R. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equations.” Review of Economic Studies 58 (No. 2 1991): 277-97. [https://doi.org/10.2307/2297968]
  • Brower, E., Kleinknecht, A., and Reijnen, J. “Employment Growth and Innovation at the Firm Level. An Empirical Study.” Journal of Evolutionary Economics 3 (No. 2 1993): 153-59. [https://doi.org/10.1007/BF01213832]
  • Dawson, J. W. “Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence.” Economic Inquiry 36 (No. 4 1998): 603-19. [https://doi.org/10.1111/j.1465-7295.1998.tb01739.x]
  • Dawson, J. W. “Regulation, Investment, and Growth: Across Countries.” Cato Journal 26 (No. 3 2006): 489-509.
  • Gwartney, J. D., Holombe, G. R., and Lawson, R. A. “Economic Freedom, Institutional Quality, and Cross-Country Differences in Income and Growth,” Cato Journal 24 (No. 3 2004): 205-33.
  • Hall, B. H., Lotti, F., and Mairesse, J. Employment, Innovation, and Productivity: Evidence from Italian Microdata. NBER Working Paper No. 13296, 2007. [https://doi.org/10.3386/w13296]
  • Hall, R. E. “The Relation between Price and Marginal Cost in U.S. Industry.” The Journal of Political Economy 29 (No. 5 1988): 921-47. [https://doi.org/10.1086/261570]
  • Hall, R. E. “Invariance Properties of Solow's Productivity Residual.” In P. Diamond (ed.), Growth/Productivity/Unemployment. MIT Press, pp. 71-112, 1990. [https://doi.org/10.3386/w3034]
  • Hulten, C. R. Total Factor Productivity: A Short Biography. NBER Working Paper No. 7471, 2000. [https://doi.org/10.3386/w7471]
  • Kee, H. L. Markups, Returns to Scale, and Productivity. The World Bank Policy Reserach Working Paper No. 2587, 2002.
  • Nickell, S. “Biases in Dynamic Models with Fixed Effects.” Econometrica 49 (No. 6 1981): 1417-26. [https://doi.org/10.2307/1911408]
  • Nicoletti, G., and Scarpetta, S. Regulation, Productivity, and Growth: OECD Evidence. World Bank Working Paper No. 2944, 2003. [https://doi.org/10.1596/1813-9450-2944]
  • OECD. Main Science and Technology Indicators. OECD Publishing, 2008.
  • Peters, B. Employment Effects of Different Innovation Activities: Macroeconometric Evidence. ZEW Discussion Papers 04-73, 2004. [https://doi.org/10.2139/ssrn.604481]
  • Piva, M., and Vaivarelli, M. “Innovation and Employment: Evidence from Italian Microdata.” Journal of Economics 86 (No. 1 2005): 65-83. [https://doi.org/10.1007/s00712-005-0140-z]
  • Roeger, W. “Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing.” Journal of Political Economy 103 (No. 2 1995): 316-30. [https://doi.org/10.1086/261985]
  • World Bank. Doing Business 2009: Country Profile for Korea. http://www.doingbusiness.org, , 2008. [https://doi.org/10.1596/978-0-8213-7609-6]
  • Zimmerman, K. F. “Employment Consequences of Technological Advance: Demand and Labour Costs in 16 German Industries.” Empirical Economics 16 (No. 2 1991): 253-66. [https://doi.org/10.1007/BF01193494]