Friday, August 14, 2009

Young's Tyranny of Numbers

I have always thought that an important part of the explanation of rapid growth of the so called Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan) was productivity. Turns out that is not necessarily the case. LSE's professor Alwyn Young has this famous paper "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience". Young's estimates of productivity -a key feature of economic growth according to the neoclassical model- for these Asian countries is not particularly different from countries such as Mexico, Brazil or Canada.

The paper argues for a different reason why economic growth boomed in the region. A -sort of- one time shock of education, participation and investment. It seems that underlying fast growth is the laggard progress they had before World War II. So its not that they are particularly good at something. Nor it is that they are productive workers. Not even that real wages are low. These economies grew because they were far away from the needed level of capital human, investment and participation. Once they achieve these levels, employment along with exports pulled these economies.

When policy recomendations for countries like Mexico point to follow the Asian Tigers, the only thing there is to follow is the improvement of investment, participation and human capital levels, not necesarily the productivity indicators. Productivity should push prices down, but it takes more than that to increase aggregate output.

Mexican Senate organized a forum to recollect the opinion of experts to increase productivity and competition. According to Young's argument, competition should be addressed as a priority, including the increase in investment - GDP ratio. Taking official series at constant prices, the ratio's growth rate has lately fall to negative levels in Mexico. This should be a policy lesson.



17 comments:

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HalFink said...

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淑媛 said...

Thx ur share........................................

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裕以 said...

一句話,那就是,"船到橋頭自然直.".............................................

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文迪 said...

我只知道,假如我去愛人生,那人生一定也會回愛我 ..................................................

DwainPike0木儀 said...

認清問題就等於已經解決了一半的問題。..................................................

嘉剛 said...

當一個人內心能容納兩樣相互衝突的東西,這個人便開始變得有價值了。..................................................................

則義 said...

要持續更新下去喲!!祝你心情愉快.................................................................

Jesús Abarca said...

Very interesting article. I agree, being a policy copycat is not gonna make Mexico's GDP grow.