Questions  are  based  on  Week  4  lecture  contents  and  are  designed  to  deepen  our  conceptual understandings. Students are strongly advised to discuss these questions with their group members in their designated tutorial classes. Questions marked * are designed for student (or group) led discussion.

1. What are the similarities and differences in broad terms between the growth experience of Korea and that of Japan? What are the similarities and differences?

*2. Professor Lee showed in lecture that the World Bank identified in The Growth Report (2008) five common characteristics of the countries which showed at least 25 years of sustained growth             performances.

a)    List the Asian economies among them. In what ways do you think the common characteristics were important for sustained economic growth?

b)   Democracy was largely lacking in these economies. Discuss why authoritarian governments could be suited for leading a rapid growth for developing economies.

*3. Let’s calculate the contribution of capital, labour, and TFP to economic growth over the following periods: 1965 – 1980, 1980 – 1990, 1990 – 2000, and 2000 – 2019, respectively, for Korea. Growth in output over a period can be decomposed into the contribution of capital and labour inputs and the   contribution of TFP (measured as a residual, also known as the Solow residual). This is called the        growth accounting method covered in Introductory Macroeconomics. The formula and data are as    follows.  Note that ∆X/X is the growth rate of X and α is a constant parameter capturing the output   share of input.

∆Y/Y = ∆A/A + α ∆K/K + (1-α) ∆L/L

Korean Data

(Data source: PWT,https://www.rug.nl/ggdc/productivity/pwt/?lang=en)

a)   Assuming α = 0.3, fill in the following table. Which period had the highest contribution of TFP?

b)   Assuming α = 0.4, repeat the above.  Do you see any major difference?

Now, consider the following decomposition shown in the table below, taken from Perkins (2013), Ch 2, p.58, originally from Eichengreen et al’s study (2012).

c)    Is there a significant difference from your estimates of TFP obtained for a) and b) above?       What explains such a large difference in the TFP estimates? What would be the limitations of the method of growth accounting?

d)   What factors would determine the TFP growth in a country?

*4. The table shows the shares of savings, investment, and average annual output growth rates for Korea, Brazil, and Malaysia over 1980 – 1991.

Now answer the following questions.