The Role of Total Factor Productivity Growth in Middle-Income Countries

34 Pages Posted: 7 Jun 2018

See all articles by Jungsuk Kim

Jungsuk Kim

Sogang University - Institute of International and Area Studies

Jungsoo Park

Sogang University

Date Written: November 2017

Abstract

We examine the importance of total factor productivity (TFP) growth in middle-income countries based on cross-country panel data for the period 1975–2014. We find that TFP growth contributed significantly to a country’s upward transition from middle-income to high-income country group. The TFP growth model reveals that the catch-up effect, human capital, smaller population, weak currency, and research and development (R&D) growth are significant sources of TFP growth. We do not find a systematic difference in the TFP growth models for middle-income countries. In analyzing the role of factors influencing TFP growth at different income stages, strengthening innovative activities and building innovative capacities are important in overcoming the challenges that middle-income countries face when transitioning to the high-income group. Governments of upper-middle-income countries need to initiate reform to motivate innovation by optimizing national R&D systems, and redesigning the educational system to target promoting innovation.

Keywords: economic growth, human capital, middle-income countries, research and development, total factor productivity

JEL Classification: O47, O57

Suggested Citation

Kim, Jungsuk and Park, Jungsoo, The Role of Total Factor Productivity Growth in Middle-Income Countries (November 2017). ADBI Working Paper 527. Available at SSRN: https://ssrn.com/abstract=3187916 or http://dx.doi.org/10.2139/ssrn.3187916

Jungsuk Kim (Contact Author)

Sogang University - Institute of International and Area Studies ( email )

35 Baekbeom-ro
Mapo-gu
Seoul, Seoul 121-742
Korea, Republic of (South Korea)

Jungsoo Park

Sogang University ( email )

35 Baekbeom-ro
Seoul, 121-742

HOME PAGE: http://hompi.sogang.ac.kr/parkjs

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