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

Jungsuk Kim () and Jungsoo Park ()
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Jungsuk Kim: Sogang University

No 527, ADB Economics Working Paper Series from Asian Development Bank

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 (search for similar items in EconPapers)
JEL-codes: O47 O57 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-11-29
New Economics Papers: this item is included in nep-gro and nep-sbm
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