RAPID ECONOMIC-GROWTH WITH INCREASING RETURNS TO SCALE AND LITTLE OR NO PRODUCTIVITY GROWTH

Total factor productivities for 28 Korean manufacturing sectors were e stimated jointly with markups, scale economies, and the capacity utili zation rate using the short-run generalized Leontief cost function. Co ncavity conditions necessary for the cost function to be well-behaved and consistent with a firm's optimizing behavior were imposed on the e stimation by way of Bayesian inference. The study finds: (a) the super iority of the short-run equilibrium model over the long-run model and of the short-run generalized Leontief cost function over the translog cost function; (b) market imperfection; (c) the existence of scale eco nomies; and (d) biases in the traditional TFP measures. The study also suggests that a rapid growth of output is possible with negative TFP growth.