Capital accumulation, technical progress and economic growth: Some empirical findings based on the meta-production function approach

This study develops an empirically implementable model of aggregate production based on the meta-production function approach. The meta-production function approach, by using pooled data from several countries, can separately identify both scale effect and technical progress and furthermore the biases of technical progress.;First, the economic growth of the Group-of-Five countries--France, West Germany, Japan, the United Kingdom and the United States and four newly industrialized countries of the Pacific Rim--Hong Kong, Singapore, South Korea and Taiwan--are analyzed and compared with one another. Technical progress is found to be the most important source of economic growth for the G-5 countries but insignificant for the NICs. Instead, capital accumulation has been most important for the growth of NICs.;Next, the reasons for the observed differences in technical progress across five industrialized countries are explored by investigating technology-embodiment and human capital growth. The model introduces the embodiment hypothesis to investigate the complementarity of capital accumulation and technical progress. Gross investment-augmentation rates of embodied technical progress are statistically significant and differ substantially across countries. Embodied technical progress is important for all countries.;Finally, a proxy of human capital stock measured by the average number of years of education per person of the working age population is explicitly specified as an argument of the augmentation factors together with exogenous technical progress. Once human capital is specified in the model, the differences in the rates and levels of exogenous technical progress across countries become smaller. It implies that the differences in the rate of growth of human capital have been responsible for the previously observed differences in technical progress.;In conclusion, the empirical findings in this study suggest that investment, whether it is in physical capital or in human capital, is a most important determinant of long term economic growth.