University of Macau
Faculty of Social Sciences and Humanities
Department of Economics
The Comparison of Economic Growth in
Developing countries and Developed countries
Wang Xu (M-B-25604-2)
Supervisor: Dr. Kwan Fung
A thesis submitted in partial fulfillment of the requirements for the
degree of Master of Social Sciences at the University of Macau
July 2014
Declaration
I, Wang xu, here by state that this thesis is my own and original
work, apart from the sections where origins are clearly stated. All
the materials in this thesis have never been used (partially or
wholly) in fulfilling the requirements for any degree or
qualification in this or other universities prior to this submission.
Student’s Signature:
Date:
Acknowledgment
I would like to express my gratitude to all those who helped me during the
writing of this thesis.
My deepest gratitude goes first and foremost to Professor Kwan Fung, my
supervisor, for his constant guidance. Without his consistent and illuminating
instruction, this thesis could not have reached its present form.
Second ， I would like to express my heartfelt to Professor Zheng mingli
and Ho Wai Hong , who gave me valuable suggestion in improving the thesis.
Last my thanks would go to my beloved family for their loving
considerations and great confidence in me all through these years. I also owe
my sincere gratitude to my friends and my fellow classmates who gave me
their help in writing the thesis.
Abstract
The period between the 1970s and 1990s was witness to rapid economic
growth in East Asia. This was especially true for the four countries termed the
“Four Asian Tigers”, which includes Hong Kong, Taiwan, Singapore and South
Korea. The development of international relationships resulted in the inflow of
capital and technology from foreign countries and drove economic growth for the
Four Asian Tigers. While people were amazed by the rapid economic growth of
East Asia, Krugman(1994) pointed out that the “Four Asian Tigers” were just
“paper tigers”. This is because the economic growth of “Four Asian tigers” mainly
depended on the large amounts of input in labor force and capital, not on the
improvement in the technology and economic efficiency. Although the economic
growth of “Four Asian Tigers” was rapid, the “real” growth of these regions still
remained at a relatively low level. In 1997, the breakout of the Asian financial
crisis and the outflow of “hot money” plunged the “Four Asian Tigers” into an
economic depression. Krugman’s opinion ended up coming true.
There are three main production factors of economic growth, namely physical
capital, labor force and total factor productivity (TFP). According to Krugman, the
growth of TFP can measure the “real” economic growth of an economy. This paper
utilizes growth accounting methodology to calculate the growth rate of TFP in
different regions around the world. In order to explore the different types of
economic growth in developing and developed countries, one hundred and thirteen
countries are selected as the sample in order to make comparisons of economic
growth. Apart from the TFP growth calculation, the effect of human capital is also
considered in the analysis of economic growth in developing and developed
countries. By measuring the contribution of capital per worker, human capital and
TFP in economic growth, the main driving force of economic growth in developing
and developed countries can be found.
Several countries achieved great economic growth between 1980 and 2011.
However, the economic growth in some regions still remained at a relatively low
level. By comparing the history of economic growth in developing and developed
countries, we can discern the reasons why some countries can rapidly improve their
economic condition and strengthen their international status.
Key words: Economic growth, TFP, human capital, growth accounting.
Table of Contents
1. Introduction………………………………………………………………….. 1
2. Literature Review…………………………………………………………... 4
3. Methodology and Data Measurement……………………………………….. 9
3.1 Growth Accounting…………………………………………………...... 7
3.2 Capital Share…………………………………………………………11
3.3 Output………………………………………………………………...... 13
3.4 Labor Force…………………………………………………………..... 15
3.5 Physical Capital………………………………………………………..... 16
3.6 Human Capital…………………………………………………………. 17
3.6.1 Educational Attainment………………………………………….. 18
3.6.2 Return to Schooling ……………………………………………... 20
4. Empirical Analysis ………………………………………………………….. 22
4.1 Regression of Economic Growth …………………………………….. 22
4.2 Constant Return to Scale……………………………………………… 23
4.3 Estimation of Capital Share…………………………………….……... 24
4.4 Calculation of Total Factor Productivity…………………………….... 26
4.5 Discussion of Economic Growth in Developed Countries. ……………30
4.5.1 Some Adjustment in the Sample of Developed Countries….….. 30
4.5.2 Economic Growth in G7 Countries……………………………. 32
4.6 Discussion of Economic Growth in Developing Countries……………36
4.6.1 Countries of BRICS………………………………………….......38
4.6.2 Developing Countries in East Asia and the Pacific………….... 41
4.6.3 Developing Countries in Latin America and the Caribbean…... 43
4.6.4 Developing Countries in South and West Asia………………... 46
4.6.5 Developing Countries in Sub-Saharan Africa…………….….. 49
4.6.6 Developing Countries in Arab States……………………….…. 52
5. Conclusion …………………………………………………………...... 54
References………………………………………………………………. 58
Appendix A…………………………………………………………….. 62
Appendix B…………………………………………………………….. 63
Appendix C…………………………………………………………….. 67