SOURCES OF GROWTH - A RECONSIDERATION AND GENERAL EQUILIBRIUM APPLICATION TO INDONESIA

A Computable General Equilibrium (CGE) model of Indonesia is developed in which total factor productivity growth in manufacturing is endogen ously determined. Productivity growth is conceptualized as human and s ocial capital accumulation, mediated by learning and institutional dev elopment stimulated by the trade regime. These factors are modeled as externalities determined by export growth and capital equipment import s. The model is used to analyze the gains deriving from the externalit ies, and subsidies that amplify their effects, leading Indonesia to ac quire Korea-like institutions sooner. The growth and fiscal implicatio ns of such counterfactual simulations are analyzed in a realistic gene ral equilibrium framework with a fully articulated public sector. (C) 1997 Elsevier Science Ltd.