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Shigeru Iwata is Associate Professor at the University of Kansas, and Hiroshi Murao is Associate Professor at Aomori Public College in Japan. The authors are grateful to Jahangir Aziz, Paul Cashin, Eduardo Ley, Sam Ouliaris, Abdelhak Senhadji, and Danyang Xie for helpful comments and suggestions on an earlier draft.
A little caution is necessary here because the last term on the right hand side of (2) is the partial derivative of F with respect to time so that it depends on the values of K and L. Here it is assumed that (∂F/∂t) = 0.
Hsieh (1997) calculates the dual measure of TFP growth by comparing the growth of output prices with the growth of the weighted average of capital and labor input prices. This method is very data intensive and difficult to use. For a critique of the Hsieh approach, particularly as applied to Singapore, see Young (1998).
See Senhadji (2000) who uses this form to estimate output elasticities for a large number of countries.
Hu and Khan (1997) substitute income shares for the elasticities of output in the translog function to calculate TFP growth in China.
In our case, the results reported in the tables are the overall sample averages of the estimated derivatives rather than a point derivative estimate at any particular point. This increases the speed of convergence by factor of root n because the point estimates are asymptotically uncorrelated.
The income shares were assumed to be the same across countries by Collins and Bosworth (1996). In an interesting paper, Sarel (1997) uses international evidence to estimate technologically-determined coefficients for each major sector of activity and then derives a weighted average for each country according to their output composition. Sard’s estimates for the capital share are between 0.28—0.35, which are close to the Collins-Bosworth value of 0.35.
Young uses 0.51 as the average labor share for Singapore, compared to 0.63 for Hong Kong SAR, 0.70 for Korea, and 0.74 for Taiwan Province of China. The growth rate of capital in Singapore during 1960-90 is 12 percent, which is about the same as in Korea and Taiwan Province of China, so Young’s very large income share estimate of capital makes TFP growth for Singapore less than a half percentage point. Collins and Bosworth (1998) use a labor share of 0.65 for Singapore (common across countries). Senhadji (2000) finds the output elasticity of labor for Singapore to be 0.52 (in levels) and 0.7 (in differences). Sarel (1997) uses an estimate of 0.65 for Singapore.
Note that the nonparametric estimates are calculated at all points of time and then averaged over various time periods to be compared with the conventional estimates.
We do not emphasize the results using the direct method for two reasons. First, the profession has long been accustomed to identify TFP growth as a Solow residual. Second, it is generally supposed that TFP growth rates are volatile over time, which contradicts the assumption of the smoothness implicit in the direct method.
The estimated capital elasticities for Korea, Singapore, and Taiwan Province of China are respectively 0.18, 0.17, and 0.18, whereas the corresponding capital shares of those countries are 0.30, 0.49, and 0.26.
For all eight countries: Hong Kong SAR, Indonesia, Korea, Malaysia, Singapore, Taiwan Province of China, Thailand, and China, the 95 percent confidence intervals of the sum of the two elasticities roughly contain unity, suggesting constant returns to scale technology. The only exception is the Philippines, whose corresponding interval is (0.40, 0.63).