Total Factor Productivity Shock and Economic Growth in Selected Asean+3 Countries: A New Evidence Using a Panel Var
Abstract
A comparison between countries shows that there is a difference in terms of economic growth achievement across nations. This difference is due to the contribution of capital growth, labor, and total factor productivity (TFP). Although the use of capital and labor plays a vital role in the production, the contribution of TFP growth is also indispensable, as it saves production costs. Nevertheless, in 1995-2000, most countries have experienced a negative growth of TFP in which can affect its contribution to economic growth. Therefore, the focal point of this study is to analyze the impact of TFP growth shock on economic growth in selected ASEAN+3 countries (i.e., Malaysia, Singapore, Thailand, Indonesia, Philippines, Cambodia, Vietnam, China, South Korea, and Japan), using the data set from 1981 to 2014. The study employed the panel vector autoregression (PVAR) method in analyzing the propagation of the shocks through impulse response function and variance decomposition. The main findings revealed that TFP growth shocks have a positive impact on economic growth. Besides, the results also showed that over the next ten years, the proportion of human capital variation would be more dominant in contributing to the economic growth for the selected ASEAN+3 countries. As the surge in TFP growth had a positive impact on economic growth, this finding indicated that each country needs to allocate more expenditure in the Research and Development (R&D) activities.
References
Andrews, D.W.K. & Lu, B. (2001). Consistent model and moment selection procedures for GMM estimation with application to dynamic panel data models. Journal of Econometrics, 101(1), 123-164.
Asian Productivity Organization (APO) (2016). APO Productivity Databook. Tokyo: Keio University Press Inc.
Atif, A., Noreha, H. & Ishak, Y. (2013). The impact of human capital on economic growth: the case of selected Arab countries. International Journal of West Asian Studies, 5(2), 77-96.
Banerjee, R. & Roy, S. S. (2014). Human capital, technological progress and trade: what explains India's long run growth?. Journal of Asian Economics, 30, 15-31.
Blundell, R. & Bond, S. (1998). Initial conditions and moment in dynamic panel data models. Journal of Econometrics, 87, 115-143.
Bosworth, B. & Collins, S. M. (2008). Accounting for growth: comparing China and India. Journal of Economic Perspective, 22, 45-66.
Cabanda, E. (2001). A comparative study of Asian telecommunication policy reform in Japan, Malaysia and Philippines. Asian Study on Pacific Coast.
Devarajan, S., Swaroop, V. & Zou, H. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37, 313-344.
Durham, J. B. (2004). Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth. European Economic Review, 48(2), 285-306.
Elsadig, M. A & Krishnasamy, G. (2013). Human capital investment to achieve knowledge-based economy in ASEAN-5: DEA application. Journal of the Knowledge Economy, 4(4), 331–342.
Elsadig, M. A. (2010). The role of FDI intensity in achieving productivity-driven growth in Malaysian economy. Applied Econometrics and International Development, 10(1), 195-208.
Fare, R., Grosskopf, S., Norris, M. & Zhang, Z. (1994). Productivity growth, technical progress,and efficiency change in industrialized countries. The American Economic Review, 84(1), 66-83.
Fauzi, H. & Nooraini, S. (2012). Economic growth in ASEAN-4 countries: a panel data analysis. International Journal of Economics and Finance, 4(9), 119-129.
Gorg, H. & Greenaway, D. (2003). Much ado about nothing. Do domestic firms really benefit from FDI. The World Bank Research Observer, 19(2), 171-197.
Growth, C., Domenech, M. G. & Srinivasan, S. (2003). Measuring total factor productivity for the United Kingdom. Bank of England Quarterly Bulletin: United Kingdom: Springer.
Hafiz, K. A., Ilyas, T. M., & Afzal, M. (2010). Exploring the effect of total factor productivity growth on future output growth: evidence from a panel of east Asian countries. Pakistan Economic and Social Review, 48(1), 105-122.
Han, M.J. (2003). Testing the predictive ability of measures of total factor productivity growth. (Unpublished doctoral dissertation), University of Missouri, Columbia.
Holtz-Eakin, D., Newey, W. & Rosen, H.S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56, 1371-1395.
Idris, J. & Rahmah, I. (2005). Total factor productivity growth in malaysian manufacturing sector. MRPA Paper No. 1966.
Im, K.S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics,115, 53-74.
Ishak, Y., Rahmah, I. & Zulkifly, O. (2011). Kebolehan, prestasi dan daya saing pekerja di sector pendidikan swasta di Malaysia. Jurnal Ekonomi Malaysia, 45, 61-70.
Kim, J., & Park, J. (2017). The role of total factor productivity growth in middle-income countries. ADB Economics Working Paper Series No. 527. Asian Development Bank. 1-34.
Kim, J. I. & Lau, L. J. (1994). The sources of economic growth of the East Asian newly industrialized countries. Journal of the Japaneese and International Economics, 8(3), 235-271.
Lai, W. S. & Ishak, Y. (2014). Pengumpulan modal insan dan pertumbuhan ekonomi di Malaysia-mengkaji nexus jangka panjang. Jurnal Ekonomi Malaysia, 48(1), 155-165.
Lai, W. S. & Ishak, Y. (2015). Comparative study of Malaysia human capital with selected ASEAN and developed countries: a fuzzy topsis method. Journal of Society and Space, 11(6), 11-22.
Lee, B. (1998). The Sources of economic growth and the role of industrial policy in Seoul, Korea. Korea Economic Research Institute.
Lee, J. W. & Hong, K. (2012). Economic growth in Asia: determinants and prospects. Japan and the World Economy, 24, 101-113.
Leonardo, E. T. C. & Luis, F. C. R. (2015). Patterns of TFP growth in Mexico: 1991-2011. North American Journal of Economics and Finance, 34, 398-420.
Love, I. & Zicchino, L. (2006). Financial development and dynamic investment behavior: evidence from panel vector autoregression. The Quarterly Review of Economics and Finance, 46, 190-210.
Lucas, R. E. Jr. (1988). On the mechanics of economics development. Journal Of Monetary Economics, 22(1), 3-42.
Malaysian Productivity Corporation (MPC). 2016. Laporan Produktiviti 2016/2017. Selangor: MPC
Oguchi, N., Amdzah, B. A., & Shafii. (2002). Productivity of foreign and domestic firms in the Malaysian manufacturing industry. Asian Economic Journal, 16(3), 215-228.
Ozturk, Ayse. (2016). Examining the economic growth and the middle-income trap from the perspective of the middle class. International Business Review, 25(3), 726–38.
Park, J. (2012). Total factor productivity growth for 12 Asian Economies: the past and the future. Japan and the World Economy, 24, 114-127.
Rahmah, I. & Idris. J. (2009). Sumbangan perubahan teknologi terhadap pertumbuhan output industri skel kecil dan sederhana di Malaysia. Jurnal Ekonomi Malaysia, 16(2), 39–61.
Rahmah, I., Noorasiah, S. & Idris, J. (2014). Total factor productivity and its contribution to Malaysia's economic growth. Research Journal of Applied Sciences, Engineering and Technology, 7(23), 4999-5005.
Rahmah, I., Noorasiah, S. & Siti Rohayu, N. (2017). Total factor productivity and its contribution to Malaysia's palm oil- based industry output growth. Review of Integrative Business And Economics Research, 6(4), 180-195.
Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, 94, 1002-1037.
Saleem, H., Shahzad, M., Bilal Khan, & Khilji, B.A. (2019). Innovation, total factor productivity and economic growth in Pakistan: a policy perspective. Journal of Economic Structures, 8(7), 1-18.
Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48(1), 1-48.
Squires, D. & Reid, C. (2004). Measuring fishing capacity in tuna fisheries: Data Envelopment Analysis industry surveys and data collection, FAO Fisheries Proceedings, 87-98.
The Conference Board Economy Database. (2015). Output, labor and labor productivity, 1950-2015. The Conference Board of Canada.
The Conference Board. (2014). Global Economics Outlook. The Conference Board Total Economy Database. Canada: The Conference Board.
Todaro, M.P. (1997). Economic Development (6th ed). New York: Addison Wesley.
Uzawa, H. (1965). Optimal Technical Change in an Aggregative Model of Economic Growth. International Economic Review, 6, 18–31.
Van der Eng, P. (2009). Total factor productivity and economic growth in Indonesia. Working Paper No. 2009/01. Canberra: The Australian National University.
Van der Eng, P. (2010). The sources of long term economic growth in Indonesia, 1880-2008. Explorations Economics History, 47(3), 294-309.
Yalcinkaya, O., Huseyni, I., & Celik, A. K. (2017). The impact of total factor productivity on economic growth for developed and emerging countries: a second-generation panel data analysis. The Journal of Applied Economic Research, 11(4), 404-417.
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
