The role of intangible capital in East Asian economic growth

This dissertation analyzes the sources of economic growth of the East Asian Newly Industrialized Economies (NIEs), with a particular focus on intangible factors of inputs. The extended metaproduction function approach was employed on a pooled time-series data of the four East Asian NIEs (Hong Kong, Korea, Singapore and Taiwan) and the G-7 countries (Canada, France, West Germany, Italy, Japan, U.S. and U.K.). Series of tests were performed on an extended sample period of aggregate economy and manufacturing sectors to identify the final specification of the model. The relative contributions of the factors of inputs were estimated for models with traditional inputs and for models with explicit inclusions of intangible inputs; human capital, domestic and foreign R&D capital stocks.; In the models with traditional inputs, the study finds technical progress to be statistically insignificant for both the manufacturing sectors and the extended samples of aggregate economy of the four East Asian NIEs, whereas the physical capital accumulation played the major role in the rapid economic growth. The explicit inclusion of human capital in the manufacturing sector model does not change the basic findings that tangible capital has been the main contributor of the growth of the NIEs. With explicit inclusion of R&D and human capital, intangible inputs are found to have contributed approximately 20 percent of the growth of the aggregate economy. The results show that R&D spillovers from the industrialized economies do influence the growth in the manufacturing sectors of NIEs. However, the study finds that the relative contribution of the foreign R&D capital is surprisingly low compared to that of the domestic R&D, implying that the gain from technological assimilation is not substantial and also providing evidence which undermines the implications of the North-South technology assimilation model. The finding presents an interesting view on the role of technological assimilation on the economic growth of the NIEs. This suggests that the NIEs may not be able to benefit largely from the foreign R&D activity when their indigenous R&D capital is small.; The study supports the view that the tangible capital accumulation is the most important source of growth in the early stage of economic development. Mere accumulation of tangible capital will not warrant the rapid growth and efficient allocation is necessary to support the growth. The major achievement of the East Asian NIEs is the efficient tangible capital accumulation. Intangible capital accumulation becomes important only after a certain level of tangible capital per worker is achieved. Although this study confirms the earlier findings in extended sample periods of aggregate economy and similar findings in manufacturing sectors, there is also evidence of substantial contribution of intangibles in the East Asian NIEs for the recent sample period.