Biased technical change, growth accounting, and the conundrum of the East Asian miracle

The standard neoclassical growth accounting approach suggests that much, if not all, of the fast growth rates of the East Asian Tigers, was input driv en. R. R. Nelson and H. Pack (Econ.J.109, 457:416-436,July 1999) have point ed out that these estimates may be subject to substantial errors caused by the presence of biased technical change and an elasticity of substitution t hat is less than 1. This paper proposes a method for implementing empirical ly their arguments. We find that. while indeed the total factor productivit y (TFP) growth rates of these countries increase with the adoption of the m odified growth accounting methodology, so also do the TFP growth rates of a group of developed countries. Thus, the standard conclusions about the rol e of technical progress in the region do not change substantially in relati ve terms. (C) 2001 Academic Press.