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Pi Gamma Mu, International Honor Society in Social Sciences

HUMAN CAPITAL AND ICT PER CAPITAL CONTRIBUTION TO EAST ASIAN PRODUCTIVITY
GROWTH
Author(s): ELSADIG MUSA AHMED
Source: International Social Science Review, Vol. 85, No. 1/2 (2010), pp. 40-55
Published by: Pi Gamma Mu, International Honor Society in Social Sciences
Stable URL: http://www.jstor.org/stable/41887430
Accessed: 15-03-2017 08:20 UTC

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40 VOLUME 85, NUMBERS 1 & 2

HUMAN CAPITAL AND ICT PER CAPITAL


CONTRIBUTION TO EAST ASIAN PRODUCTIVITY
GROWTH

By ELSADIG MUSA AHMED

Introduction

The knowledge-based economy (K-based economy) is not confined to information and


communication technology (ICT) alone. Even before the evolution of ICT, knowledge was
personified in human beings' "human capital" and technology. It was further embodied in
capital investment undertaken by those countries associated with the so-called Asian mira-
cle. This study examines the impact of capital productivity, labor, ICT, and human capital
per unit of capital, or the total factor productivity (TFP) per unit of capital in the economies
of five members of the Association for Southeast Asian Nations (ASEAN): Indonesia,
Malaysia, the Philippines, Singapore, and Thailand (hereafter ASEAN5). Whereas high
capital input growth resulted in low capital productivity with insignificant technological
progress experiences in the economies of these countries, labor, ICT, and human capital per
unit of capital played a significant role in achieving light productivity contribution to the
growth of these economies through the use of huge inputs to produce output.

Literature Review

According to a report issued by ASEAN in 2003, there are both benefits and chal-
lenges in measuring and monitoring a digital economy driven by ICT.1 The Organizatio
for Economic Cooperation and Development (OECD) concurs, finding that ICT provides
an important catalyst for growth and productivity.2 Indeed, recent studies by Poh-Kam
Wong and Kaushalesh Lai show the positive effects of ICT on productivity and output
growth in Singapore and India, repectively.3
The e-ASEAN Initiative is illustrative of one of the efforts undertaken by ASEAN5
leaders in developing the ICT sector in the region. This initiative established a region-wid
approach in making comprehensive use of ICTs in business, government, and society at
large, which facilitated the liberalization of trade and investments in ICT products and
services. In order to develop effective policy formulation and enhance collaboratio
among the ASEAN5 countries to promote the development of the ICT industry, empirical
evidence is required to demonstrate the contribution of ICT to economic growth in these
countries. This can help bridge the digital divide between ASEAN5 and other Asian
Pacific countries, as well as among the ASEAN5 countries. To accomplish this, thes
governments must promote universal and affordable access to information and communi
cations services.4
Much of the recent debate on the sources of economic growth in Asia has been strongly

ELSADIG MUSA AHMED is a senior lecturer in the Economics Unit, Faculty o


Business and Law at Multimedia University in Melaka, Malaysia.

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INTERNATIONAL SOCIAL SCIENCE REVIEW 4 1

focused at the macro-level.5 Both Paul Krugm


growth has been driven by increases in capita
tion, Kenneth Kraemer and Jason Dedrick, in
investment in twelve Asian-Pacific countrie
development during the 1980s, show a signif
investment and both productivity and econo
limited data involved in that study, however,
cated models that would control for the imp
and Dedrick were able to identify several fact
of ICT investment: GDP per capita, education
sector, and level of IT infrastructure.7 Unfor
effects of ICT on economic growth for a sam
attempts to fill this gap in the literature by
nomic growth of the ASEAN5 countries and
According to empirical studies on economic
human capital accumulation 'something else'
countries. To be sure, both physical and hum
in economic growth. The process becomes m
account for the role of knowledge in that grow
residual of labor and capital, the 'Solow resid
Total Factor Productivity (TFP). TFP refers t
ments in efficiency that are accounted for
capital, skills and expertise, acquisition of ef
tional improvements, benefits derived from
technology, and enhancement in ICT. The not
those factors other than labour [sic] and cap
contribute to the generation of output." It ex
it captures endogenous technical change and o
ing diffusion of knowledge, organization, r
models which contribute to market efficienc
can be gauged to some extent, and incorporat
explain growth in the K-based economy that
performance of TFP provides insight into the
growth accounts fail to consider improveme
education, these improvements are assigned
stock of physical capital are also assigned to
It has long been held that ICT contributes to g
but previous studies regarding ICT investme
nificant relationship. Those studies indicate th
gate economy have been limited, despite rapi
computers and heavy investment in ICT. This
United States invested heavily in ICT during
growth slowed during that period (as compare
is referred to as 'productivity paradox.'10
Productivity paradox suggests that ICT
increase in ICT may not lead to higher rates
productivity paradox of IT as the lack of corr

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42 VOLUME 85, NUMBERS 1 & 2

tivity growth gains.11 For Matti Po


between ICT investment and measu
tries.12 Danny Quah adds that prod
investment in ICT over the past fo
economies' measured productivity.
existing capital without much pro
country growth literature. Anoth
spillover effect. Here Pierre Mohne
ment spillovers.14 Since Mohnen 's s
have become prominent features in
There has been much research on
sibility of the interaction between
'quality-ladder' models in the work
that of Philippe Aghion and Peter H
and generate an endogenous rate o
driving force of innovation and
Jorgenson and William Nordhaus r
ated in recent years.17 In regard t
propels the return of strong econom
A number of other studies are also
Zvi Griliches and Dale W. Jorgenso
changes in the composition and edu
ress.19 Barry Bosworth and Susan C
more informative way to focus on
of investment rates as a regressor.2
as well as Kevin Stiroh, have also m
through the study of decompositi
investigate variation in productivit
the link with ICT capital.21 In part
aggregate labor productivity based
decomposition quantifies the direct
based on three groups of industrie
from the IT revolution.22 Charles S
gies used to examine aggregate r
Asia, SUR for Latin America).23 In
with Stephen O'Connell and Ndulu B
side (RHS) variables to each other
regression-based decomposition of
to produce an unbiased and consiste
challenges this claim, arguing that:

In theory, regression analysis shou


variables, even if they are correla
a prerequisite to decomposition s
variables are themselves function
such a system explicitly?25

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INTERNATIONAL SOCIAL SCIENCE REVIEW 43

Thus far, ICT has been viewed as a comp


model of the ICT-growth nexus and assum
productivity inputs are in place. As such,
economic policy variables is included in ICT-g
of ICT on the economy of a particular cou
more harm than good to that country's ec
regulated.26 They add that ICT has shown a
In sum, the role of ICT in growth theori
to economic growth through TFP and cap
economic growth depends on the state of
individual countries. On the one hand,
growth if appropriate policies are adopted t
on the hypothesis that market forces, toge
may prove sufficient to generate economic
a negative effect on economic growth if
analyses due to differences in data or defi
ing variables. This might lead to variation
lation and improvements in TFP.28
There is a growing consensus among econ
cialists that technology innovation and diff
nomic growth and productivity.29 Both W
logical innovation in explaining economic g
that economic growth and technological ch
spread technology diffusion creates the poss
Some researchers have made a case for IC
investments in ICT can accelerate economic
increasing returns on investments in oth
itself can be a source of economic growth
is said to enhance national productivity an
growth. Such assertions challenge the 'pro
make a positive contribution to economic g
To support this claim, a number of stud
sector to TFP growth in the United State
and Frank Lee explore the contributions o
productivity growth in Australia, Canada
They report that ICT penetration is strong
Bart Ark finds that productivity growth
eral European countries can be explained,
sector in the United States.34 Studies by
Stephen Oliner and Daniel Sichel maintain
growth in United States in the 1990s came
ICT played a significant role in fostering a
economy. Despite some methodological diff
attributing about one-quarter percentage
since 1995 to ICT (TFP growth in the ICT
tal deepening (all of which is attributable t
estimate that ICT has contributed three-fou

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44 VOLUME 85, NUMBERS 1 & 2

In contrast, Robert Gordon, along w


agnostic view that the ICT "revolu
pose technologies introduced over th
With regard to the impact of kno
Dahlman use an array of indicators
independent variables in cross-secti
1960 and 2000. They find that know
nomic growth. Specifically, the sto
and technological adaptation, and t
significant positive effects on long-
of human capital stock, an increase
a population tends to increase the
point. In terms of innovation, a tw
granted by the United States Patent
percentage points in annual econom
ured by the number of phones per
economic growth tends to increase b
New growth theory predicts that p
productivity growth than tradition
positive externalities associated wit
'knowledge spillovers' - increases in
general stock of knowledge upon wh
nalities arise as a result of the 'lear
learn new skills and more efficient
ment.39 These models suggest that
logically dynamic sectors of the gl
have a greater impact on productivi
A number of recent empirical stud
and statistically significant relation
Eric Brynjolfsson and Lorin Hitt,
economy between 1988 and 1992, in
odology:

• control for individual firms' differences in productivity by employing a 'firm


effects' specification;
• less restrictive translog production function instead of only the Cobb-Douglas
specification; and,
• flexibility in parameters' variation between various sub-sectors of the economy.

They conclude that the elasticity of IT remains positive and statistically significant.
Furthermore, they find 'firm effects' to be highly significant. Brynjolfsson and Hitt sug-
gest that these effects may account for as much as half of the productivity benefits cred-
ited to IT in previous studies.40
These findings have been verified and challenged in two key studies. Frank Lichtenberg
obtained similar results using much of the same data. In fact, his study indicates that the
marginal product of IT was at least six times greater than the marginal product of other
types of capital. In contrast, Gary Loveman estimated a Cobb-Douglas production fune-

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INTERNATIONAL SOCIAL SCIENCE REVIEW 45

tion using a data set covering sixty busin


did not find any evidence of strong produc
This study will explore the effects of IC
five ASEAN member states: Indonesia, Ma
(ASEAN5). It seeks to determine the contr
growth of these countries and investigate
also examines the impact of capital produc
capital and the mutual contribution of the
tal on ASEAN5 productivity.

Methodology and Estima


In this study, the Cobb-Douglas producti
residual' model are used as a modified mod
each model. According to Renuska Mahade
facturing sector have used the nonparamet
Dale W. Jorgenson, Frank Gallop, and Barb
explicit specification of a production funct
is not based on statistical theory. Consequ
evaluate their reliability. This study attem
transforming this model into a parametric
the first step and then calculate the produ
the second gap of econometric estimation
doing so, the production function for an e
equation:

GDPt, i=F (Kt, i, Lt, i, ICTt, i, HCt, i, Tt,i) (1)

where Country / = 1, 2, ..., 5 in Year t =1965-2004; real Gross Do


(which adjusts for inflation) is a function of real fixed physical ca
L, the number of telephone lines per 1,000 persons, that proxies f
education that proxies for Human Capital (HC), and time T, that p
nological progress of the economies (the total factor productivit
quality of inputs used in production such as labor, ICT, and human
In this parametric model, provisions are made to provide the coe
of the explanatory variables such as oc, ß, X, and 0 in order to me
capital labor, ICT, and human capital, and provide statistical analys
as follows:

InGDPt,i = a + a. InKt, i + ß. lnLt, i + À. lnICTt, i + 6. InHCt, i + et, i (2)


t = 1965-2004

where
a is the output elasticity with respect to capital;
ß is the output elasticity with respect to labor;
X is the output elasticity with respect to ICT;
6 is the output elasticity with respect to human capital;

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46 VOLUME 85, NUMBERS 1 & 2

a is the intercept or constant


e is the residual term;45 and,
In is the logarithm to transform the variables.
In accordance with studies by David Dollar and Kenneth Sokoloff, Poh-Kam Wong,
Jesus Felipe, and Elsadig Musa Ahmed,46 when constant returns a ( '-ß-Ä-0) to scale is
imposed, Equation (2) becomes:

In GDPt, i = a + ('-ß-Ä-0). InKt, i + /JlnKt, i + ÀìnICTt, i + 0. lnHCt, i + ft, i (3)


t = 1965-2004

For the purpose of this study, Equation (3) was transformed by dividing each term by
K (capital input). The output elasticity was calculated with respect to labor deepening, ICT
intensity, and human capital intensity, i.e., ß = ß' + >S2, X = Ài + A2, and 0 = 01 + 02,
respectively. As shown in Dollar and Sokoloff as well as Elsadig,47 the production functio
can be expressed as follows:

Aln (GDP/L)t, i = a + ßAln (L/K)t, i + ß[A'n (L/K)t, i]2 + Ai Ain (ICT/K)t, i


+ /b[Aln (ICT/K)t, i]2 + 0i Aln (HC/K)t, i + ft[Aln (HC/K)t, i]2 + ft, i (4)
t = 1965 - 2004

Here,
Aln (GDP/L)t, i is the capital productivity contribution (output per capital);
ßAln (L/K) = ßAln (L/K)t, i + ^[Aln (L/K)t, i]2
is the contribution of the labor deepening (labor per unit of capital);
ÀAln (ICT/L) = AiAln (ICT/K)t, i = k[A'n (ICT/K)t, i]2
is the contribution of the ICT intensity (ICT per unit of captial);
0Aln (HC/K) = ft Aln (HC/K)t, i = ft[Aln (HC/K)t, i]2
is the contribution of the human capital intensity (human capital per unit of capital);
ft, i is the residual term that proxies for TFP intensity (TFP per unit of capital) growth
(Aln (TFP/K)t, i); and,
A is the difference operator denoting proportionate change rate.

Since the intercept (a) has no position in the calculation of productivity growth rate indica-
tors, the equation becomes:

Aln (GDO/K)t, i = ß. Aln (L/KL)t, i + X Aln (ICT/K)t, i + 0. Aln (HC/K)t, i +


Aln (TFP/K)t, i (5)

where, ß , X and 0 denot


and human capital per un
per unit of capital growth
To calculate the average a
tion of other productivit

Aln (TFP/K)t, i = Aln (GD


(6)

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INTERNATIONAL SOCIAL SCIENCE REVIEW 47

Equation (6) expresses the decomposition o


tributions of labor per unit of capital, incre
capital per unit of capital, and TFP per unit

Sources of Data
Data for this study, which consists of rea
physical capital number of employment, rea
telephone lines per 1,000 persons, were colle
in the International Monetary Fund online d
the World Bank. The missing data is validate
databases, Asian Development Bank: Key
Countries, Statistical and Data Systems Divis
for the period 1965-2004. Due to the lack of
input index is constructed based on the num

Results and Discussion

An autoregressive estimator (which is used to correct the problem of autocorre


among the explanatory variables and achieve the results listed in Table 1) has been ap
to Equation (4) of the model generated from the Cobb-Douglas production function
measure the shift in production functions within the economies of ASEAN5. Annual
series data covering the period from 1965 to 2004 for real GDP, real fixed physical ca
number of persons employed, real expenditure in education, and the number of tele
lines per 1,000 persons were used for each individual country.
Analysis of the data using Equation (4) shows that the estimated coefficients of
explanatory variables of the model were significant at both the five and ten percent
According to Durbin-H values,48 the model has no problem of autocorrelation (see
1). In addition, the adjusted R2and t- values do not indicate multicollinearity in the
(see Table 1). Since the model used here was specified in first differences and the
lated growth rates were used in the discussion of the results and findings of this study
model was found to be stationary.49 This supports the claim of Robert Engle and W.J
Granger that if economic relationships are specified in first differences instead of
statistical difficulties due to non-stationary variables can be avoided because the d
enced variables are usually stationary even if the original variables are not.50

Empirical Analysis
Import substitution industrialization (ISI) refers to an economic policy based on
principle that a developing country should try to replace products which it impor
mostly finished goods, with locally produced substitutes. The theory is comparable
concept of mercantilism in that it promotes high exports and minimal imports to in
national wealth. It is based on three basic premises: the adoption of a dynamic ind
policy to subsidize and arrange production of strategic substitutes, support of prote
trade barriers (tariffs), and a monetary policy that overvalues domestic currency (d
ation of national currency is often employed to facilitate exports). Not surprisingly,
substitution policies are opposed by advocates of free trade.51

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48 VOLUME 85, NUMBERS 1 & 2

Table 1: Estimated Coefficie


Country Intercept Labor per C

(-0.34) 0.22 0.13 0.15 0.17 0.20 0.13

(-2.52)** 0.14 0.20 0.16 0.20 0.14 0.16

(1.83)* 0.15 0.19 0.20 0.21 0.16 0.14

(1.42) 0.16 0.17 0.15 0.21 0.14 0.17


(1.93)* (2.15)** (2.12)** (1.84)* (1.75)* (1.64)*
5. Thailand T 7Ï a, a2 fi fi Jx I2 0.76 -0.69
(-1.76)* 0.17 0.18 0.19 0.17 0.14 0.15

N.B.: Figures in parentheses


** Indicates significant at 5
* Indicates significant at 1
Figures in Table 1 were est

To enhance their manufact


tured goods, allowing mult
locally. One example of this
exported vehicles in 'compl
usually resulted in product
imported 'completely built
to have identical products a
only served to duplicate re
By contrast, export-orient
tion industrialization (ESI)
aimed at accelerating indust
comparative advantage. Exp
competition in exchange for
ing exchange rates, and gov
cies designed to promote ec
larly characteristic in the d
Kong, Singapore, South Kor
Despite support for EOI in
ingly challenged in recent
yielded expected results. EO
partially responsible for th
of countries that had adopt
uct diversity, which makes
Analysis (see Table 2) was
the ASEAN5 economies fro

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INTERNATIONAL SOCIAL SCIENCE REVIEW 49

policies in improving productivity growt


frames which correspond to major policy
and 1970s witnessed labor-driven policies
economies in these countries. During the
Many economists attribute the superior pe
to that decision. Typically, import substitu
create a drag on the economy. The 1980s, 1
however, saw the diversification and adva
ment-driven policies. Despite the Asian fi
structural transformation took place in th
facturing sector as the key engine of econo
The contribution of TFP per unit of cap
countries in terms of average annual produ
contribution of capital productivity was fo
of capital (intensities) in the model to the pr
period 1965-1987 (see Table 2). The contribu
productivity growth in the economies of t
(see Table 2). In comparing the two periods,
1965-1987, was an era of labor and invest
1988-2004, was an era of investment-driven
economic activities of these countries. Con
tries experienced rapid growth after the tra
ment-driven policies supported by foreign
Neither TFP per unit of capital growth
productivity growth in the economies of t
the economic recessions of 1973 and 1985,
human capital and technology involved in
this study also show that whereas high cap
tivity with insignificant technological prog
sity played a significant role in achieving
the use of huge inputs to produce outputs
studies, most of the economic growth in t
has been driven by increases in capital inte
This study also reveals that the contribu
capital productivity in terms of the averag
countries remained low throughout the ent
It further shows that by the late 1980s the
sity eventually helped to attract significa
their adoption of trade liberalization polic
ownership of foreign companies. Such poli
global capital.
In this study of the role of ICT and hum
economy through the contribution of TFP
contribution of ICT and human capital inte
economies of the ASEAN5 countries fro
noted that FDI served as the source of tec
transnational corporation (TNC) investmen

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50 VOLUME 85, NUMBERS 1 & 2

the United States, which resulted


there, this study shows that ICT p
ment of the ASEAN5 countries. By
paradox' can not stand alone withou

Table 2: ASEAN5 Productivi


Country Capital Productivity La
Capital Capital
1. Indonesia
1965-2004 2.28 1.94 1.88 5.44 0.51
1965-1987 4.11 1.93 1.59 8.22 0.77

1988-2004 1.79

2. Malaysia
1965-2004 4.92 1.28 1.31 6.31 1.11
1965-1987 6.92 2.58 2.50 7.00 1.53

1988-2004 2.32

3. Philippines
1965-2004 2.32 1.09 1.14 1.87 1.59
1965-1987 4.19 1.22 1.13 0.85 1.43

1988-2004 0.79

4. Singapore
1965-2004 2.32 1.30 2.00 2.00 1.33
1965-1987 4.20 1.95 6.71 3.64 1.83
1988-2004 1.79 1.74 6.91 4.24 1.98
5. Thailand
1965-2004 2.31 1.46 1.97 1.21 1.04
1965-1987 4.16 1.56 1.84 1.29 1.61
1988-2004 2.79 1.66 1.33 1.32 1.89

V.B.: Figures in Table 2 were calculate

Conclusion

Few studies offer an empirical examination of capital productivity and related produ
tivity indicators. This study fills that gap in the literature by providing a statistical analy
in the first step of the estimation to attain the coefficients of the explanatory variables u
by an econometric approach. A second step that plugs the parameters of the variables i
the model to compute the growth rates of productivity indicators includes the calculat
of the residual of the model (TFP intensity) and other productivity indicators (e.g., cap
productivity, labor intensity, and ICT and human capital intensity) used in a growth
accounting approach.
The factors that determined capital productivity in ASEAN5 countries from an inte
sive growth-theory model are the individual contributions of labor per unit of capit
(deepening), ICT per unit of capital (intensity), human capital per unit of capital (int
sity), and the concurrent contribution of the quality of these factors expressed as the T
per unit of capital (intensity).
The results of this study confirm that whereas high capital input growth resulted in
capital productivity with insignificant technological progress experiences in ASEAN5
countries, labor intensity played a significant role in achieving light capital productivi

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INTERNATIONAL SOCIAL SCIENCE REVIEW 5 1

contribution produced by the economies of


to produce outputs (i.e., import-driven, no
dependent on TNC investments). In other w
logical progress in other Asian countries s
through productivity-driven policies.
The results of this study should prove use
of the contributions of ICT to productivit
examined here should help policymakers d
ICT policies. The findings of this study sho
promotion of ICT investment and the develo
ture necessary to support effective use of t
able to capitalize on its synergy and make f
come its economic limitations. If so, Ma
toward becoming a technology-sawy nation
In accordance with the initiatives taken by
ing the 'digital divide' among these states,
evidence on the extent of that 'digital divid
of appropriate policies to bridge that gap.
allows for comparisons between countries a
of adaptation, mastery, and development. M
countries will help in identifying policies f
In short, determining which country lags
tion among the ASEAN5 countries in order
as a whole.

ENDNOTES

!See ASEAN, "Challenges and Opportunities in Information and Co


Technologies," 33rd ASEAN Ministerial Meeting, July 2003, www.aseansec
on December 15, 2009).
2See OECD, ICT and Economic Growth - Evidence from OECD Countries
and Firms (Paris: OECD, 2003).
3Poh-Kam Wong, "The Contribution of Information Technology to the
of Singapore," in Information Technology, Productivity, and Econ
International Evidence and Implications for Economic Development, ed
(New York: Oxford University Press, 2001), 221-41; Kaushalesh Lai, "The
of the Adoption of Information Technology: A Case Study of the India Garm
in Information Technology, Productivity, and Economic Growth, ed. Pohjo
4ASEAN, "The e-ASEAN Initiative," http://www.aseansec.org/10336.
on November 2, 2005).
5See, for example, I. Houng Lee and Yougesh Khatri, "Information Tech
Productivity Growth in Asia," International Monetary Fund Working Pap
(January 2003); Mj Mat Junoh Mohd Zukime, "Predicting GDP Growth in
Knowledge-based Economy Indicators: A Comparison between Neural
Econometric Approaches," Sunway College Journal 1 (2004):39-50.
6Paul Krugman, "The Myth of Asia's Miracle," Foreign Affairs 37, no.
December 1994):62-78; Allwyn Young, "The Tyranny of Numbers: Co

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52 VOLUME 85, NUMBERS 1 & 2

Statistical Realities of the East


Economics 110 (August 1 995):64 1
7Kenneth L. Kraemer and Jasan D
Technology: Lessons from the A
(December 1 994): 1 92 1 -3 1 . Anoth
to the economic growth of Asian c
and Productivity Growth in Asia."
8See Robert Solow, "Technical C
Review of Economics and Statis
Production Function and the Theor
1956): 101-08.
9Government of Malaysia, Know
Government of Malaysia Printers,
10Martin Baily, "What Happene
1986):443-51; Martin Baily and
Measurement Issues and the Exp
Economic Activity (Washington,
Loveman, "An Assessment of the
Working Paper No. 88-054, Manage
Stephen Roach, White Collar Produ
Stanley, 1988); Stephen Roach, A
Information Economy (New York:
are yet to make companies more pr
www. strassman.com/pubs/vetprod
1 Francesco Daveri, "Is Growth
Innocenzo Gasparini Institute for E
12See Pohjola, "Information Tec
Analysis," in Information Technolo
242-56.
13Danny Quah, "Technology Dissemination and Economic Growth: Some Lessons for
the New Economy," in Technology and the New Economy, eds. Cong-En Bai and Chi-Wa
Yuan (Cambridge, MA: MIT Press, 2003), 95-156.
14Regarding the debate in cross-country growth literature as to whether or not ICT may
displace existing capital without productivity gain, see endnote 10. Pierre Mohnen,
"International R&D Spillovers and Economic Growth," in Information Technology,
Productivity, and Economic Growth, ed. Pohjola, 50-71.
15Jorah Ramlan, "Information and Communication Technology: A Study of Its
Economic Growth in Malaysia" (Unpublished Ph.D. thesis, Multimedia University,
Malaysia, 2009).
16Gene Grossman and Elhanan Helpman, Innovation and Growth in the Global
Economy (Cambridge, MA: MIT Press, 1991); Philippe Aghion and Peter Howitt, "A
Model of Growth through Creative Destruction," Econometrica 60, no. 2 (March
1 992):323-5 1 .
17Dale W. Jorgenson, "Information Technology and the U.S. Economy," American
Economic Review 91, no. 1 (March 2001): 1-32; William Nordhaus, "Productivity Growth
and the New Economy," National Bureau of Economic Research, Working Paper No. 8096
(2001).

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INTERNATIONAL SOCIAL SCIENCE REVIEW 53

18Kevin Stiroh, "Growth and Innovati


Handbook , ed. Derek C. Jones (San Diego
723-51.
19Edward Denison, "The Sources of Growth in the United States and the Alternative
Before Us," Supplementary Paper, Committee for Economic Development (1962):229-55;
Zvi Griliches and Dale W. Jorgenson, "Capital Theory: Technical Progress and Capital
Structure, Sources of Measured Productivity Change Capital Input," American Economic
Review 61, no. 2 (May 1966):50-61.
20Barry Bosworth and Susan Collins, "The Empires of Growth: An Update," Brookings
Papers on Economic Activity (Washington, D.C.: Brookings Institution, 2003), 1 13-206.
21Bart Van Ark, Robert Inklaar, and Robert McGuckin, "Changing Gear, Productivity,
ICT and Services Industries: Europe and the United States," The Groningen Growth and
Development Centre, Research Memorandum No. GD-60, (2002), www.eco.rug.nl/ggda/
pub/online/gd60f onlinei.pdf (accessed on December 15, 2009), 1-79.
22Kevin Stiroh, "Information Technology and U.S. Productivity Revival: A Review of
the Evidence," Business Economics 37 (January 2002):30-37.
23Charles Soludo and Jongil. Kim, "Sources of Aggregate Growth in Developing
Regions: Still More Questions and Answers?" in Explaining Growth: A Global Research
Project , eds. Gary McMahon and Lyn Squire (New York: Palgrave Macmillan, 2003),
32-76. OLS (Ordinary Least Squares) and SUR (Seemingly Unrelated Regression) are
both econometric tools normally used to generate empirical results from data.
24 Anke Hoefïler, "The Augmented Solow Model and the African Growth Debate,"
Background Paper, Center for the Study of African Economies, University of Oxford,
(1999); Stephen O'Connell and Ndulu Benne, "Governance and Growth in Sub-Saharan
Africa," Journal of Economic Perspectives 13, no. 3 (Summer 2000):41-66.
25Quoted in Soludo and Kim, "Sources of Aggregate Growth in Developing Regions," 47.
26See, for example, Daveri, "Is Growth an Information Technology Story in Europe too?"
27See Pohjola, "Information Technology, Productivity, and Economic Growth," in
Information Technology, Productivity, and Economic Growth , ed. Pohjola, 242-56.
28Ramlan, "Information and Communications Technology," 58.
29Kenneth Kraemer and Jasan Dedrick, "Information Technology and Productivity:
Results and Policy Implications of Cross-Country Studies," Center for Research on
Information Technology and Organizations, Working Paper #PAC-144 (1999).
30Paul Romer, "Endogenous Technological Change," in The Return of Increasing
Returns, ed. John Young Buchanan (Ann Arbor, MI: University of Michigan Press, 1990),
287-318.
31W. Brian Arthur, "Increasing Returns and the New World of Business," Harvard
Business Review 74, no. 4 (July- August 1996): 100-09.
32Asian Productivity Organization, "Information Technology-led Development";
Ashoka Moody and Carl Dahlman, "Performance and Potential of Information Technology:
An International Perspective," World Development 20, no.l (1992): 1703- 19; OECD,
Usage Indicators : A New Foundation for Information Technology Policies (Paris: OECD,
1993); OECD, Technologies in the 1990s : A Socio-Economic Strategy (Paris: OECD,
1988).
33Dirk Pilat and Frank Lee, "Productivity Growth in ICT-producing and ICT-using
Industries: A Source of Growth Differentials in the OECD?" OECD-STI Working Paper
(1991).

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54 VOLUME 85, NUMBERS 1 & 2

34Bart Ark, "The Renewal of t


Perspective," OECD Science, Techno
35Dale W. Jorgenson and Kevin
Growth in the Information Age,"
D.C.: Brookings Institution, 200
Resurgence of Growth in the Late
of Economic Perspectives 14 (Fall
36Robert Gordon, "Does the 'New E
Past?" Journal of Economic Perspe
Triplett, "What's New about the Ne
http://www.brook.edu/views/paper
2009), 1-31.
37Derek Chen and Carl Dahlman, "Knowledge and Development: A Cross-Section
Approach," World Bank Policy Research Working Paper No. 3366 (2004).
38Paul Roemer, "Increasing Returns and Long-run Growth," Journal of Political
Economy 94 (October 1986): 1002-37; Grossman and Helpman, Innovation and Growth in
the Global Economy.
39J. Bradford De Long and Lawrence Summers, "Equipment Investment and Economic
Growth," Quarterly Journal of Economics 106, no. 2 (May 1991):445-502.
40Erik Brynjolfsson and Lorin Hitt, "Paradox Lost? Evidence on the Returns to
Information Systems Spending," Management Science 42, no. 4 (April 1996):541-58.
41Frank Lichtenberg, "The Output Contributions of Corporate Equipment and
Personnel: A Firm-Level Analysis," National Bureau of Economic Research, Working
Paper No. 4540 (1993); Gary Loveman, "An Assessment of the Productivity Impact of
Information Technologies Management in the 90s," in Information Technology and the
Corporation of the 1990s , eds. Thomas J. Allen and Michael S. Morton (New York: Oxford
University Press, 1994), 84-110.
42Renuka Mahadevan, "Assessing the Output and Productivity Growth of Malaysia's
Manufacturing Sector," Journal of Asian Economies 12, no. 4 (Winter 2001):587-97; Dale
W. Jorgenson, Frank Gallop, and Barbara Framenri, Productivity and U.S. Economic
Growth (Cambridge, MA: Harvard University Press, 1987).
43In economics, the Cobb-Douglas production function is widely used to represent the
relationship of an output to inputs. First proposed by Knut Wicksell (1851-1926), it was
tested against empirical evidence by Charles Cobb and Paul Douglas between 1900 and
1928. See Charles W. Cobb and Paul H. Douglas, "A Theory of Production," American
Economic Review 18 (1928): 139-65.
44The intercept term gives the mean or average effect on dependent variable of all the
variables excluded from the model.
45The residual term proxies for the TFP growth that accounts for the technological
progress of the economy through the quality of input terms.
46David Dollar and Kevin Sokoloff, "Patterns of Productivity Growth in South Korean
Manufacturing Industries, 1963-1979," Journal of Development Economics , 3, no. 2
(October 1990):309-27; Poh-Kam Wong, "Patterns of Labor Productivity Growth and
Employment Shift in the Singapore Manufacturing Industries," Singapore Economic
Review 38, no. 2 (May 1991):23 1-51; Jesus Felipe, "On the Myth and Mystery of
Singapore's Zero TFP," Asian Economic Journal 14, no. 2 (June 2000): 187-208; Elsadig
Musa Ahmed, "ICT and Human Capital Role in Achieving Knowledge-based Economy:

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INTERNATIONAL SOCIAL SCIENCE REVIEW 55

Applications on Malaysia's Manufacturi


Knowledge Management 5, no. 2 (June 200
47Dollar and Sokoloff, "Patterns of Produc
Industries, 1963-1979," 309-27; Elsadig,
Knowledge-based Economy," 1-12
48Durbin's h-Test is an algorithm for det
series regression. See Joanne Durbin, "T
Regression when some of the Regressors
38, no. 3 (May 1970):4 10-21. The h-statisti
hypothesis is that there is no autocorrelati
49'Stationarity' refers to a statistician's t
tion of the term, see Clifford J. Sherry,
Mathematics of Technical Analysis: Apply
Futures," http://www.iuniverse.com (acce
50Robert F. Engle and W.J. Clive Grange
and Autoregressive Conditional Heteroske
of Sweden Prize in Economic Sciences in M
51 John Charles Chasteen, Born in Blood a
2nd ed. (London: WW. Norton & Compa
Richard S. Weinert, Authoritarianism in M
of Human Issues, Inc., 1977), 67-107; Werner Baer, "Import Substitution and
Industrialization in Latin America: Experiences and Interpretations," Latin American
Research Review 1 (Spring 1972):95- 122.
52 Ibid.
53 Ibid.
54 Ibid.
55For comparisons of ISI and EOI policies in Latin America and East Asia, see Ibid.

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