World Economic Performance
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World Economic Performance

Past, Present and Future

Edited by D. S.P. Rao and Bart van Ark

World economic performance over the last 50 years has been spectacular. The postwar period has witnessed impressive growth rates in Western Europe and Japan, and in recent times China and India. This new book discusses these issues and tackles topical questions such as; what are the socio-economic and institutional factors that have contributed to this impressive performance? Will China and India continue to grow at the same rate over the next two decades? What are the prospects for Japan, the US and other advanced economies? The book brings together contributions by eminent scholars including the late Angus Maddison, Professors Justin Lin, Bob Gordon, Ross Garnaut, Bart van Ark and others to provide answers to these fascinating questions. The chapters analyse the economic performance of selected countries including China, India, Japan, Indonesia and the US, as well as Western Europe, Latin America and developing countries as a group. The time period of the study is from 1850 to the present and includes forecasts to 2030.
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Chapter 8: Total Factor Productivity and Economic Growth in Indonesia


Much of the recent literature on macroeconomic growth in Asia continues to be dominated by discussion of the degree to which Total Factor Productivity (TFP) growth explains the ‘Asian economic miracle’ of high economic growth. However, Young (1994) argued, on the basis of a four-country study, that the ‘miracle’ was more the result of the mobilisation of factors of production (labour and capital) than productivity growth, i.e. ‘perspiration’ rather than ‘inspiration’, as Krugman (1994) summarised his findings. This incited a series of studies that often used readily available multi-country data sets in order to estimate TFP growth in different parts of the world, on the assumption that the growth accounting residual represents TFP growth.2 The multi-country studies that estimated TFP growth all yielded different results. One of the reasons was that authors were forced to make very rough estimates of capital input on the basis of available national accounts data. In the case of Indonesia, close scrutiny of the data reveals inexplicable discrepancies in the original national accounts data produced at the central statistical agency (Badan Pusat Statistik, BPS) in Indonesia. Moreover, studies using multi-country data sets take national accounts data for granted.

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