| Abstract: |
In this paper we extend our previous studies (Didenko et al., 2012; Földvári
et al., 2012; Van Leeuwen et al., 2011) on the role of conventional factors of
production (fixed, or physical, and human forms of capital) and their
productivity depending on their interrelations and economic development
policies. Methodologically based on Solow (1956, 1957) and Mankiw, Romer, and
Weil (1992) we apply our theoretical models on the factors of economic growth
to compare China with the republics of the former Soviet Union and, to this
end, create a new database for both regions. Following Krugman (1994), we
decompose economic growth in perspiration (i.e. production factors) and
inspiration (i.e. TFP, which consists in turn of technical efficiency of the
production factors and a general production frontier) factors and find that in
the socialist central-planning period economic growth was largely driven by
physical and, to lesser extent, human capital accumulation. Moreover, at these
times conventional TFP change was strongly negative (1930s for the FSU, 1950s
for China). This means that focusing mainly on physical capital increases the
factors of production (hence increasing growth via perspiration) but reduces
the technical efficiency of the factors of production strongly (hence lowers
the growth via TFP, i.e. inspiration). After the economic transitions were
launched (end 1970s in China and end 1980s in the FSU) the
inspiration/perspiration pattern changed. China managed to keep technical
inefficiency relatively moderate, largely by massively increasing its human
capital (which made it easier to make use of physical capital). At the same
time, they managed to increase their productivity frontier. In the FSU,
however, the change in the human to physical capital ratio was primarily
caused not by an increase of human-, but rather by a decrease of physical
capital. This means that, even though technical efficiency relatively
increased, the general productivity frontier remained stable or declined. This
changed in the late 1990s and the start of the 21th century when the FSU
started to recover somewhat, only to reach the 1990 level. |
| Keywords: |
factors of production, human capital, productivity, technology, economic development, socialism, USSR, China |