On the 3rd of July 2018, Dr Chuah Lay Lian from the Macroeconomics and Growth team of the World Bank’s Development Research Group hub in Kuala Lumpur presented on the topic of “Resource Misallocation and Productivity Gaps in Malaysia”.
This document summarizes David Ricardo's theory of rent from his book "Principles of Political Economy and Taxation." Ricardo defined rent as the payment made for the use of land and its natural fertility. He argued that rent arises due to differences in land fertility - more fertile land generates a surplus over less fertile land. This surplus is what constitutes economic rent. Ricardo also explained how rent can arise from intensive cultivation due to diminishing marginal returns from additional labor and capital on a single plot of land.
The document discusses several theories of economic growth and development that were proposed over time, including:
1) Linear stage theories that propose economies progress through distinct stages of growth. This includes Rostow's stages of growth model and the Harrod-Domar model focusing on physical capital.
2) Structural change theories like the Lewis model that view economies as having traditional and modern sectors, with labor moving from the former to the latter.
3) Dependency theories that argue less developed economies are held back by powerful external forces from more developed "core" economies.
4) Neoclassical growth theories including the Solow model incorporate technological progress and consider factors like savings rates, population growth, and capital accumulation.
Pakistan's major agricultural issues since independence and how agriculture's contributions has drastically declined in comparison with manufacturing and services businesses.
The document discusses key aspects of the Islamic economic system and how it enables prosperity. It argues that Islam motivates human energy and creativity through private property and prohibiting idleness. It ensures utilization of resources by making land available and pooling creativity and capital. It also focuses on equitable distribution of wealth through prohibitions on interest, hoarding, and distinguishing private from public property. The system is seen as durable because it prevents popular discontent through development and allocation of wealth without dependency relations that can cause crises.
phillips curve and other related topics.pdfAyushi Thakur
The document discusses Philip's curve, which shows an inverse relationship between unemployment and inflation in the short run. It describes how Philip originally observed this relationship in UK data from 1861-1957. Friedman argued that in the long run there is no tradeoff, as the Philip's curve becomes vertical at the natural rate of unemployment. Adaptive expectations cause the curve to shift over time as actual inflation exceeds expected inflation, driving unemployment back to the natural rate. The natural rate is where expected inflation equals actual inflation, with no tendency for either to rise or fall.
The document analyzes the risk and return of Pakistan's bond market from 2005 to 2015. It aims to analyze the factors affecting returns in the bond market. The researchers conducted interviews and literature reviews on bond markets. They identified key factors like risk, interest rates, fiscal deficit, exchange rates and GDP that could impact bond yields. Regression analysis was performed on Pakistan Investment Bond data from 3, 5 and 10 year bonds against the independent variables. The results found positive relationships between bond yields and risk, interest rates, and fiscal deficit. Exchange rates and GDP had negative relationships with bond yields.
Industrial growth in India has strengthened significantly during the period of economic planning. [1] India is now ranked among the top 10 most industrialized nations in the world. [2] Major accomplishments include establishing a strong industrial base in key sectors like steel and fertilizers through setting up new plants, improving infrastructure, and increasing the industrial sector's contribution to GDP and exports. [3] However, challenges remain such as underutilization of capacity, rising regional imbalances, and weak performance of some public sector industries.
This document provides an overview of post-Keynesian economics. It defines post-Keynesian economics, outlines some of its key characteristics such as its focus on effective demand and historical dynamics. It also describes some of the different strands within post-Keynesian theory, including Michal Kalecki's emphasis on imperfect competition and class division. Additionally, it summarizes theories around post-Keynesian income distribution in corporate economies developed by Robinson, Kaldor and Pasinetti, and post-Keynesian employment analysis based on the principle of effective demand determining labor-hire decisions.
This document summarizes David Ricardo's theory of rent from his book "Principles of Political Economy and Taxation." Ricardo defined rent as the payment made for the use of land and its natural fertility. He argued that rent arises due to differences in land fertility - more fertile land generates a surplus over less fertile land. This surplus is what constitutes economic rent. Ricardo also explained how rent can arise from intensive cultivation due to diminishing marginal returns from additional labor and capital on a single plot of land.
The document discusses several theories of economic growth and development that were proposed over time, including:
1) Linear stage theories that propose economies progress through distinct stages of growth. This includes Rostow's stages of growth model and the Harrod-Domar model focusing on physical capital.
2) Structural change theories like the Lewis model that view economies as having traditional and modern sectors, with labor moving from the former to the latter.
3) Dependency theories that argue less developed economies are held back by powerful external forces from more developed "core" economies.
4) Neoclassical growth theories including the Solow model incorporate technological progress and consider factors like savings rates, population growth, and capital accumulation.
Pakistan's major agricultural issues since independence and how agriculture's contributions has drastically declined in comparison with manufacturing and services businesses.
The document discusses key aspects of the Islamic economic system and how it enables prosperity. It argues that Islam motivates human energy and creativity through private property and prohibiting idleness. It ensures utilization of resources by making land available and pooling creativity and capital. It also focuses on equitable distribution of wealth through prohibitions on interest, hoarding, and distinguishing private from public property. The system is seen as durable because it prevents popular discontent through development and allocation of wealth without dependency relations that can cause crises.
phillips curve and other related topics.pdfAyushi Thakur
The document discusses Philip's curve, which shows an inverse relationship between unemployment and inflation in the short run. It describes how Philip originally observed this relationship in UK data from 1861-1957. Friedman argued that in the long run there is no tradeoff, as the Philip's curve becomes vertical at the natural rate of unemployment. Adaptive expectations cause the curve to shift over time as actual inflation exceeds expected inflation, driving unemployment back to the natural rate. The natural rate is where expected inflation equals actual inflation, with no tendency for either to rise or fall.
The document analyzes the risk and return of Pakistan's bond market from 2005 to 2015. It aims to analyze the factors affecting returns in the bond market. The researchers conducted interviews and literature reviews on bond markets. They identified key factors like risk, interest rates, fiscal deficit, exchange rates and GDP that could impact bond yields. Regression analysis was performed on Pakistan Investment Bond data from 3, 5 and 10 year bonds against the independent variables. The results found positive relationships between bond yields and risk, interest rates, and fiscal deficit. Exchange rates and GDP had negative relationships with bond yields.
Industrial growth in India has strengthened significantly during the period of economic planning. [1] India is now ranked among the top 10 most industrialized nations in the world. [2] Major accomplishments include establishing a strong industrial base in key sectors like steel and fertilizers through setting up new plants, improving infrastructure, and increasing the industrial sector's contribution to GDP and exports. [3] However, challenges remain such as underutilization of capacity, rising regional imbalances, and weak performance of some public sector industries.
This document provides an overview of post-Keynesian economics. It defines post-Keynesian economics, outlines some of its key characteristics such as its focus on effective demand and historical dynamics. It also describes some of the different strands within post-Keynesian theory, including Michal Kalecki's emphasis on imperfect competition and class division. Additionally, it summarizes theories around post-Keynesian income distribution in corporate economies developed by Robinson, Kaldor and Pasinetti, and post-Keynesian employment analysis based on the principle of effective demand determining labor-hire decisions.
For all those interested in "Optimum Currency Areas" - my new infoposter "ECONOMICS" is now available:
- the poster gives an overview of the development of economic theory from its beginnings.
- the poster shows the historical roots of economic ideas and their application to contemporary economic policy debates.
View and order at http://www.cee-portal.at/PrestaShop
Best regards
Martin Kolmhofer
David Ricardo fue un influyente economista clásico inglés que desarrolló teorías como la renta diferencial, la ley de rendimientos decrecientes y la ventaja comparativa. Sus teorías se centraron en explicar las interrelaciones entre la renta de la tierra, los salarios, las ganancias y los precios de los alimentos en el contexto de la economía agrícola inglesa después de las guerras napoleónicas. Ricardo también analizó conceptos como el estado estacionario de la economía y la importancia del libre comercio intern
1. Welfare economics analyzes how economic policies affect overall social welfare. Classical welfare economics assumed welfare was additive and could be quantitatively measured and compared between individuals.
2. New welfare economics is normative rather than positive and recognizes welfare cannot be cardinally measured, only ordinally. It compares the relative social welfare of different economic states. Scholars like Hicks, Pigou, Kaldor and Scitovsky contributed to developing new welfare economics.
3. The Hicks-Kaldor compensation principle states that if one group gains from a policy change while another loses, but the gainers could potentially compensate the losers and still be better off, then the change increases social welfare. Scitovsky
The document provides information on India's economic planning process through five-year plans since 1951. It summarizes the key focus areas and growth targets of each five-year plan from the First Plan to the current Twelfth Plan. Some of the major highlights include the First Plan's focus on developing the primary sector, the Second Plan's emphasis on developing public sector industries, and more recent plans targeting higher GDP growth rates along with more inclusive and sustainable development.
M 051 La medición de costos en la empresa neoclásica Jorge Pablo Rivas
La medición de los Costos en la Empresa Neoclásica
coste de oportunidad
Costos sociales
Costos Privados
Costos Externos
Costos Internos a CORTO PLAZO
Costos fijos y variables
Costos medios y marginales
This document discusses the challenges of intellectual history and analyzing the origins and development of economic theories. It focuses on Luigi Pasinetti's book analyzing the Cambridge Keynesians. Pasinetti argues that Keynes recognized his theory required rejecting the neoclassical exchange paradigm in favor of a production paradigm. However, Keynes did not object to models blending the approaches, like IS-LM. Pasinetti wants to portray Keynes as intuiting a radical break from orthodoxy, but Keynes accepted reconciliations of his theory with marginalism. The document questions Pasinetti's interpretation of Keynes and the Cambridge Keynesians.
The role of small scale industries in indiaArnav Dhankad
Small scale industries play an important role in the Indian economy by contributing significantly to industrial output, exports, and employment. They account for about 40% of industrial output and create the largest number of jobs after agriculture. Food products, non-metallic mineral products, and metal products are some of the largest employment generating small scale industries in India.
This document provides an overview of investment. It discusses three types of investment: business fixed investment, residential investment, and inventory investment. It then explains the neoclassical model of business fixed investment, which shows how investment depends on the marginal product of capital, interest rate, and tax rules. It also discusses Tobin's q theory of investment and factors that can influence investment like the stock market, financing constraints, and the housing market.
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
The document compares the monetary and Keynesian approaches to economic stability. The monetary (or monetarist) approach is based on the role of money in stabilizing aggregate demand, and believes that limiting government intervention and controlling the money supply are key. The Keynesian approach focuses on the role of government spending in stabilizing aggregate demand, and does not restrict government intervention. It believes fiscal policy tools like tax rates and government spending are most important for achieving economic stability, especially during downturns when suggested solutions include increasing various types of spending.
This document discusses various demographic indicators and compares statistics between first, second, and third world countries. It defines indicators like fertility rate, mortality rate, population growth rate, migration rate, and discusses metrics for countries like Canada, China, and Pakistan. Fertility rates are declining in developed nations due to economic factors influencing family size. Mortality rates are falling globally due to improved healthcare. Population growth is highest in the third world due to sustained high fertility and declining mortality. Migration is influenced by various push-pull factors. Overall life expectancy and health outcomes are better in the first world compared to other nations.
The Romans borrowed most of their economic ideas from the Greeks. They were primarily focused on expanding their vast empire through military power rather than developing original economic theories. While the Romans respected Greek intellectual and artistic achievements, they built upon Greek architecture to develop new solutions required to construct massive cities with high populations. During the decline of the Roman Empire, some philosophers began discussing economic topics and viewed money lending and luxury as harmful, instead favoring simplicity and small family farms. Roman law also established concepts still used in economics like private property, contracts, and definitions of price, money, and loans.
This document discusses trends in savings and investment in India and their impact on the economy. It notes that savings and investment are important for economic growth. India has seen impressive economic growth over the past 30 years, partly due to rising savings and investment. Household savings in India have increased significantly as a percentage of GDP. However, increased savings do not always correspond to increased investment, which can lead to recession rather than growth. The document also examines factors influencing investment levels and discusses challenges around increasing household investment in financial markets in India.
The document discusses the IS curve, which shows the negative relationship between interest rates and the level of income in goods markets. It assumes a two-sector economy with no government or foreign trade. The IS curve slopes downward because higher interest rates reduce investment, which decreases aggregate demand and equilibrium income. The steepness of the IS curve depends on how much investment changes with interest rates and the multiplier effect. The IS curve can shift due to changes in investment, savings, government spending, or taxes.
This document summarizes key aspects of three recent bills passed in India related to agriculture:
01. The Farmer Produce Trade and Commerce Bill allows barrier-free intra- and inter-state trade of farm produce outside of government-regulated wholesale markets (mandis). This threatens state tax revenues and mandi jobs.
02. The Farmers' Empowerment and Protection Agreement on Price Assurance and Farm Services Bill allows pre-agreed pricing for contract farming but contains loopholes and may not benefit small farmers.
03. The Essential Commodities (Amendment) Bill removes commodities from essential items lists, allowing unlimited corporate stockpiling which could artificially impact prices against farmers after harvests
Understanding Welfare maximization Model for Economics in Municipal servicesferdous hussain
Understanding Welfare maximization Model for Economics is important for location analysis choice and distribution. when equity and efficiency is the most concern over cost and time. can use full to provide municipal services location choice.
Trends and patterns of Savings (Household Savings) in India Akash Singh
This is my seminar work which i have done in my 4th semester. An attempt has been made to analyze the changing trends of savings and its dependency on certain factors in India , a comparative graphical representation of China and India has been done to reflect patterns of changing rates in these two emerging economies . Please do give valuable suggestion so as to improve in future .
- The document discusses changing patterns of market power and concentration using a structural macroeconomic model. It finds that while markups impose substantial welfare costs, policies targeting concentration can be ineffective or backfire by reducing productivity. The optimal level of concentration may be higher than typically thought. Explanations for rising markups are complex and reflect technological and regulatory factors that determine firm markups and market structure.
The Productivity Puzzle: Insights from the Dynamic Capabilities FrameworkDavid Teece
This document discusses the productivity puzzle and proposes that a lack of strong dynamic capabilities in firms and ecosystems is a contributing factor.
It begins by defining productivity, competitive advantage, and the productivity puzzle. It then contrasts ordinary capabilities focused on efficiency with dynamic capabilities focused on innovation, sensing opportunities, and transforming.
The document argues that dynamic capabilities are more important for competitive advantage and productivity growth in knowledge-intensive industries. It also discusses how clustering and regional innovation ecosystems can foster dynamic capabilities and knowledge spillovers.
The conclusion is that focusing only on neoclassical views of productivity is too narrow and that entrepreneurship, dynamic capabilities in firms, and supportive ecosystems and governance need to be central to understanding and addressing the
For all those interested in "Optimum Currency Areas" - my new infoposter "ECONOMICS" is now available:
- the poster gives an overview of the development of economic theory from its beginnings.
- the poster shows the historical roots of economic ideas and their application to contemporary economic policy debates.
View and order at http://www.cee-portal.at/PrestaShop
Best regards
Martin Kolmhofer
David Ricardo fue un influyente economista clásico inglés que desarrolló teorías como la renta diferencial, la ley de rendimientos decrecientes y la ventaja comparativa. Sus teorías se centraron en explicar las interrelaciones entre la renta de la tierra, los salarios, las ganancias y los precios de los alimentos en el contexto de la economía agrícola inglesa después de las guerras napoleónicas. Ricardo también analizó conceptos como el estado estacionario de la economía y la importancia del libre comercio intern
1. Welfare economics analyzes how economic policies affect overall social welfare. Classical welfare economics assumed welfare was additive and could be quantitatively measured and compared between individuals.
2. New welfare economics is normative rather than positive and recognizes welfare cannot be cardinally measured, only ordinally. It compares the relative social welfare of different economic states. Scholars like Hicks, Pigou, Kaldor and Scitovsky contributed to developing new welfare economics.
3. The Hicks-Kaldor compensation principle states that if one group gains from a policy change while another loses, but the gainers could potentially compensate the losers and still be better off, then the change increases social welfare. Scitovsky
The document provides information on India's economic planning process through five-year plans since 1951. It summarizes the key focus areas and growth targets of each five-year plan from the First Plan to the current Twelfth Plan. Some of the major highlights include the First Plan's focus on developing the primary sector, the Second Plan's emphasis on developing public sector industries, and more recent plans targeting higher GDP growth rates along with more inclusive and sustainable development.
M 051 La medición de costos en la empresa neoclásica Jorge Pablo Rivas
La medición de los Costos en la Empresa Neoclásica
coste de oportunidad
Costos sociales
Costos Privados
Costos Externos
Costos Internos a CORTO PLAZO
Costos fijos y variables
Costos medios y marginales
This document discusses the challenges of intellectual history and analyzing the origins and development of economic theories. It focuses on Luigi Pasinetti's book analyzing the Cambridge Keynesians. Pasinetti argues that Keynes recognized his theory required rejecting the neoclassical exchange paradigm in favor of a production paradigm. However, Keynes did not object to models blending the approaches, like IS-LM. Pasinetti wants to portray Keynes as intuiting a radical break from orthodoxy, but Keynes accepted reconciliations of his theory with marginalism. The document questions Pasinetti's interpretation of Keynes and the Cambridge Keynesians.
The role of small scale industries in indiaArnav Dhankad
Small scale industries play an important role in the Indian economy by contributing significantly to industrial output, exports, and employment. They account for about 40% of industrial output and create the largest number of jobs after agriculture. Food products, non-metallic mineral products, and metal products are some of the largest employment generating small scale industries in India.
This document provides an overview of investment. It discusses three types of investment: business fixed investment, residential investment, and inventory investment. It then explains the neoclassical model of business fixed investment, which shows how investment depends on the marginal product of capital, interest rate, and tax rules. It also discusses Tobin's q theory of investment and factors that can influence investment like the stock market, financing constraints, and the housing market.
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
The document compares the monetary and Keynesian approaches to economic stability. The monetary (or monetarist) approach is based on the role of money in stabilizing aggregate demand, and believes that limiting government intervention and controlling the money supply are key. The Keynesian approach focuses on the role of government spending in stabilizing aggregate demand, and does not restrict government intervention. It believes fiscal policy tools like tax rates and government spending are most important for achieving economic stability, especially during downturns when suggested solutions include increasing various types of spending.
This document discusses various demographic indicators and compares statistics between first, second, and third world countries. It defines indicators like fertility rate, mortality rate, population growth rate, migration rate, and discusses metrics for countries like Canada, China, and Pakistan. Fertility rates are declining in developed nations due to economic factors influencing family size. Mortality rates are falling globally due to improved healthcare. Population growth is highest in the third world due to sustained high fertility and declining mortality. Migration is influenced by various push-pull factors. Overall life expectancy and health outcomes are better in the first world compared to other nations.
The Romans borrowed most of their economic ideas from the Greeks. They were primarily focused on expanding their vast empire through military power rather than developing original economic theories. While the Romans respected Greek intellectual and artistic achievements, they built upon Greek architecture to develop new solutions required to construct massive cities with high populations. During the decline of the Roman Empire, some philosophers began discussing economic topics and viewed money lending and luxury as harmful, instead favoring simplicity and small family farms. Roman law also established concepts still used in economics like private property, contracts, and definitions of price, money, and loans.
This document discusses trends in savings and investment in India and their impact on the economy. It notes that savings and investment are important for economic growth. India has seen impressive economic growth over the past 30 years, partly due to rising savings and investment. Household savings in India have increased significantly as a percentage of GDP. However, increased savings do not always correspond to increased investment, which can lead to recession rather than growth. The document also examines factors influencing investment levels and discusses challenges around increasing household investment in financial markets in India.
The document discusses the IS curve, which shows the negative relationship between interest rates and the level of income in goods markets. It assumes a two-sector economy with no government or foreign trade. The IS curve slopes downward because higher interest rates reduce investment, which decreases aggregate demand and equilibrium income. The steepness of the IS curve depends on how much investment changes with interest rates and the multiplier effect. The IS curve can shift due to changes in investment, savings, government spending, or taxes.
This document summarizes key aspects of three recent bills passed in India related to agriculture:
01. The Farmer Produce Trade and Commerce Bill allows barrier-free intra- and inter-state trade of farm produce outside of government-regulated wholesale markets (mandis). This threatens state tax revenues and mandi jobs.
02. The Farmers' Empowerment and Protection Agreement on Price Assurance and Farm Services Bill allows pre-agreed pricing for contract farming but contains loopholes and may not benefit small farmers.
03. The Essential Commodities (Amendment) Bill removes commodities from essential items lists, allowing unlimited corporate stockpiling which could artificially impact prices against farmers after harvests
Understanding Welfare maximization Model for Economics in Municipal servicesferdous hussain
Understanding Welfare maximization Model for Economics is important for location analysis choice and distribution. when equity and efficiency is the most concern over cost and time. can use full to provide municipal services location choice.
Trends and patterns of Savings (Household Savings) in India Akash Singh
This is my seminar work which i have done in my 4th semester. An attempt has been made to analyze the changing trends of savings and its dependency on certain factors in India , a comparative graphical representation of China and India has been done to reflect patterns of changing rates in these two emerging economies . Please do give valuable suggestion so as to improve in future .
- The document discusses changing patterns of market power and concentration using a structural macroeconomic model. It finds that while markups impose substantial welfare costs, policies targeting concentration can be ineffective or backfire by reducing productivity. The optimal level of concentration may be higher than typically thought. Explanations for rising markups are complex and reflect technological and regulatory factors that determine firm markups and market structure.
The Productivity Puzzle: Insights from the Dynamic Capabilities FrameworkDavid Teece
This document discusses the productivity puzzle and proposes that a lack of strong dynamic capabilities in firms and ecosystems is a contributing factor.
It begins by defining productivity, competitive advantage, and the productivity puzzle. It then contrasts ordinary capabilities focused on efficiency with dynamic capabilities focused on innovation, sensing opportunities, and transforming.
The document argues that dynamic capabilities are more important for competitive advantage and productivity growth in knowledge-intensive industries. It also discusses how clustering and regional innovation ecosystems can foster dynamic capabilities and knowledge spillovers.
The conclusion is that focusing only on neoclassical views of productivity is too narrow and that entrepreneurship, dynamic capabilities in firms, and supportive ecosystems and governance need to be central to understanding and addressing the
1) The document analyzes firm-level data from Mexico's National Micro, Small and Medium Enterprise Productivity and Competitiveness Survey (ENAPROCE) to understand factors influencing productivity.
2) Preliminary results show that family business practices, lower human capital, and poorer managerial practices are associated with lower productivity, while innovation and skills training are linked to higher productivity.
3) The data provides insights into policies that could support improving productivity, such as aligning incentives away from nepotism, developing managerial skills, and promoting innovation.
This presentation by Stephen Davies (Professor of Economics, University of East Anglia, UK) was delivered during a workshop on “Methodologies to measure market competition” held virtually for competition authorities officials on 23 February 2021. More materials on the topic can be found at http://oe.cd/mmkts.
This presentation was uploaded with the author’s consent
Porter's Five Forces model is used to analyze industry structure and competition. It examines five forces: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and rivalry among existing competitors. The document discusses how the model provides a framework for understanding how these different competitive forces determine the attractiveness and profitability of an industry. It also notes some limitations of applying the model given changes in technologies and industries over time.
Dynamic Capability Concept Of Strategic ManagementAlison Hall
The document discusses the dynamic capability concept of strategic management. It defines dynamic capability as an organization's ability to integrate internal and external competencies to manage rapid environmental changes. This concept extends the resource-based view by allowing organizations to adapt to technological changes. Dynamic capabilities provide competitive advantage through innovation, but are not easily transferable between organizations.
Policies for Growth - SIMPATIC 3 April 2014Dirk Pilat
1) Investment in knowledge-based capital, such as research and development, brands, and organizational capital, now accounts for over half of business investment in several OECD countries and is growing in importance.
2) Well-functioning framework policies around product markets, labor markets, and bankruptcy laws can encourage investment in knowledge-based capital by raising returns and allowing resources to flow to innovative firms. However, policies also need to address specific assets like intellectual property, skills, and access to data.
3) Countries differ in their policy mixes for innovation, with many relying more on R&D tax incentives than direct funding. While both can increase R&D, the impact on productivity and the design of policies matters to avoid
The document summarizes key concepts from Chapter 7 on international strategy, including:
1) The importance of international expansion as a diversification strategy and understanding sources of national advantage.
2) The motivations and risks associated with international expansion, including increasing market scope and reducing costs.
3) The two opposing forces of cost reduction and adaptation to local markets that firms face internationally.
4) The advantages and limitations of global, multidomestic, and transnational strategies, and the four basic entry strategies of exporting, licensing, strategic alliances, and wholly owned subsidiaries.
Job Dynamics: New International Evidence. Carlo Menon. ERC Understanding Smal...enterpriseresearchcentre
This document summarizes research on micro start-ups and job creation across 18 countries using a harmonized firm-level database. The analysis finds that:
1) A small share (around 5%) of micro start-ups (less than 10 employees) grow beyond 10 employees within 3 years, but these account for 23-54% of job reallocation by micro start-ups.
2) Younger micro start-ups (0-2 years old) are more likely to grow and create jobs, while older micro start-ups (11+ years) are more likely to remain stable or become inactive.
3) During economic downturns, the share of micro start-ups growing decreases while the
Seminar 8 creating an investment recommendationpvalantagul
The document provides guidance on creating an investment recommendation and pitching a stock. It outlines the key components of a stock pitch, including analyzing if a company is a good business and if it will be a good stock. An example stock pitch for Waste Management is then presented, analyzing the company, industry, financials, valuation, opportunities/risks, and recommending the stock as a buy. The document emphasizes synthesizing information from prior seminars to develop an investment thesis and recommendation.
Analysis: BCG, The Most Innovative Companies, 2012Katherine Michel
The document summarizes key findings from the Boston Consulting Group report on the most innovative companies in 2012. It finds that technology and telecommunications companies dominate the top ten, with Apple and Google ranked #1 and #2. These industries place high priority on innovation. Breakthrough ideas, speed to market, customer input, and intellectual property management are important practices. Data-driven decision making and a holistic view of innovation are also emphasized. Consistent innovation is tied to greater long-term returns.
This document summarizes key points from Chapter 13 of the textbook "Investment Analysis and Portfolio Management" on industry analysis. It discusses analyzing differences in returns and risk across industries over time. While past performance does not predict future results, economic cycles impact industry sectors differently. Industries also have life cycles from growth to maturity. Porter's five competitive forces model is presented to analyze industry competition and expected returns. Methods for estimating industry growth, costs, profits and valuation multiples are outlined. Global considerations are noted when analyzing industries.
Overconfident CEOs tend to overestimate their abilities and the prospects of their firms. Two methods are commonly used to measure CEO overconfidence: an options-based measure and a press-based measure. A study finds that overconfident CEOs invest more in innovation as measured by patents. They achieve greater innovative output relative to R&D input. However, this does not necessarily translate to higher firm value. The study also finds that overconfident CEOs are more effective at exploiting growth opportunities and translating them into firm value, especially in innovative industries. The wealth effects of corporate decisions can extend to suppliers and customers through supply chain linkages. A study examines the stock price reactions of suppliers and customers around the bankruptcy filings
The Main Costs And Benefits Of The Financial Sector Of UkCandice Him
The document discusses the costs and benefits of the UK financial sector. It notes that the financial sector plays a pivotal role in providing finance for consumption and investment, and includes institutions like banks, building societies, insurance companies, and pension funds. Banks account for 57% of the UK financial sector's gross value added. A well-functioning financial sector benefits the economy by providing payment systems, financial intermediation between savers and borrowers, and facilitating risk management. However, a flawed financial system without proper regulation can lead to economic disaster, particularly during recessions.
Professor Mark Hart presented on key components of levelling up economic opportunity across regions in the UK. He discussed the importance of business dynamism, local productivity distributions, innovation funding, and access to equity finance outside of London and the Southeast. Specifically, he noted that (1) business start-up and growth metrics are crucial for understanding regional economic trajectories (2) there are significant differences in productivity across firms of different sizes in high vs low performing regions, and (3) public funding and private equity are disproportionately concentrated in London and Southeast regions.
This paper examines productivity spillovers from foreign direct investment (FDI) in Chilean manufacturing firms. It tests several hypotheses: (1) higher competition leads to larger spillovers, (2) firms with R&D expenditure gain more spillovers, and (3) there are positive spillovers to productivity growth components. The methodology uses a stochastic frontier approach and Malmquist index to decompose productivity growth. The results confirm positive spillover effects and show firms with R&D gain more. Productivity growth is mainly from technological progress. The conclusion recommends policies to strengthen domestic firm absorptive capacity through knowledge/human capital in addition to attracting FDI.
Determinants of investment in intangible assetsMadhavMehra9
This study examines factors that influence investment in intangible assets for 346 Indian companies from 2000-2001 to 2011-2012 using dynamic panel data regression. The results show that firm size, profitability, market share, and export intensity positively influence intangible asset investment, while leverage, age, and capital intensity have a negative influence. The study also finds that past intangible asset investment is positively related to current investment, indicating the dynamic nature of intangible assets. The findings suggest managers should increase intangible asset investment as firms grow in size and market share.
Similar to Resource Misallocation and Productivity Gaps in Malaysia (20)
The document summarizes a focus group discussion on food security measures for Budget 2024. It includes:
1) An agenda for the focus group discussion, which involves an opening remarks, presentation by Khazanah Research Institute on ensuring food security, and a discussion session.
2) The presentation by Khazanah Research Institute covers trends in global and national food security, challenges facing Malaysia's food supply, and recommendations for Budget 2024 including developing Sabah and Sarawak's paddy industry.
3) Discussion points to address food security through Budget 2024 in the areas of availability, accessibility, and utilization.
The document summarizes a presentation on wages and households in Malaysia from 2010 to 2019. It assesses wage growth and inequality using salary survey data. Key findings include overall progressive wage growth but regressive growth for non-minimum wage earners. Minimum wage increases benefited low-wage workers but effects dissipated towards the median. Middle-income earners experienced the slowest absolute growth. Wage stagnation remained an issue even after minimum wage increases. The presentation concludes with recommendations for centralized wage setting to raise middle incomes and incentivize productivity growth.
KRI Webinar - Rich Places, Poor Places: Managing the realities of neighbourhoodsKhazanahResearchInstitute
What are the necessary conditions for ‘diverse and thriving’ neighbourhoods? What is the opposite of ‘diverse and thriving’ neighbourhoods? Are thriving neighbourhoods more expensive to live in? Are our capacities to grow into middle-income earners limited by the neighbourhoods we reside in?
In this webinar, we will explore how prosperous neighbourhoods are distinguished by their levels of place differentiation – a reflection of the diverse freedoms and opportunities they offer to residents. The discourse will also include housing as the pivotal anchor that shapes the lives of households.
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1) Malaysia's labor market faces several structural issues including wages that are misaligned with productivity, insufficient high-skilled job creation, and skills mismatches between graduates and industry needs.
2) To address these issues, Malaysia should focus on creating high-skilled, high-paying jobs while reducing reliance on low-skilled foreign workers. This includes providing clarity on where foreign workers are most needed and how to support productivity growth.
3) Establishing meaningful industry participation is also important to equip the workforce with the right skills through aligning policy with evolving industry needs and learning from existing successful models of collaboration between industry, academia and government.
Enclaves are areas of urban change driven by migration flows rather than static spaces. Enclaves are important areas of social interaction for both migrants and the wider society. The characteristics of enclaves are shaped by patterns of migration and policies surrounding migration management.
This document discusses conceptualizing societal harms of artificial intelligence. It notes that individual harm can occur when an individual is negatively impacted by AI, and societal harm can happen when connections between individuals or groups are negatively affected. The document examines defining harm as a wrongful setback to or thwarting of an interest.
This document discusses the shift toward embracing industrial policy by countries in the global North. It notes the long history of development failure and income gaps persisting in regions outside of Northeast Asia, which successfully adopted industrial policy. While industrial policy was discouraged for developing countries, major powers like the US and UK are now pursuing ambitious industrial policies themselves to compete with China's rise and address climate change and inequality issues. This represents a major change from the previous dominance of "neoliberal" ideas opposing government intervention in markets. Geopolitical tensions, especially with China, are now shaping economic policies in the global North.
Institution and Economic Development in Korea
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Malaysia has experienced some economic transformation but has yet to fully shift into complex, high-value industries according to its Economic Complexity Index and product space analysis. While it has winnowed in simple, low-value goods like garments, its expansion into more sophisticated categories like chemicals has been minimal. To advance further, the document recommends localizing growth by promoting regional strengths, shortening distances between industries, removing divisions, and focusing on enhancing firm productivity and cluster-wide development to strengthen entire value chains within dense areas of the product space. This would help firm Malaysia's shift toward more complex economic activities and sustainable growth.
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2) Trends suggest GVCs will become shorter, more regionalized, and driven by platforms and customization rather than mass production. Electric vehicles (EVs) present an opportunity for Malaysia given its critical mineral resources and potential as an ASEAN market.
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Foreign Direct Investment (FDI) and Global Value Chains (GVCs) have transformed Southeast Asia's economy from one focused on exporting raw materials to one that plays an important role in international manufacturing networks. However, rising protectionism is causing a rethinking of GVCs toward regionalization. This presents both challenges and opportunities for Southeast Asian countries to develop resilience in GVCs by diversifying beyond being just production hubs and leveraging their positions as regional market hubs. GVC resilience requires adjustments from countries, industries, and firms in both developing new strengths and adapting to the changing economic context.
Special Address - Recent World Trends and Threats and to Malaysia ProspectsKhazanahResearchInstitute
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Too often, policy research on the paddy and rice industry in Malaysia focuses on the cheaper, medium-grained plain rice primarily produced in Peninsular Malaysia. Heirloom/specialty paddy cultivation in Sabah and Sarawak has received less attention. However, it holds the potential to spur the competitiveness of Malaysia’s paddy and rice industry.
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Care work, including both paid and unpaid activities that involve looking after someone else's physical, psychological, and emotional needs, is undervalued socially and economically. While essential for human well-being, most care work is performed by women in informal and low-paid jobs. The feminization and globalization of the care sector has created opportunities as well as challenges. With aging populations and changing social norms, care work has the potential to generate significant employment, especially as technology cannot fully replace the human element of care. However, policies are needed to improve training, wages, and working conditions for care workers and ensure universal access to high-quality care.
Micronutrient deficiencies, also known as hidden hunger, affect millions of children and cause stunted growth, cognitive delays, and weakened immunity. Common deficiencies include iodine, vitamin A, iron, zinc, and calcium/vitamin D/folate during pregnancy. These deficiencies can be addressed through supplementation, food fortification, and biofortification programs. The National Plan of Action on Nutrition Malaysia III aims to reduce micronutrient deficiencies through universal salt iodization, prenatal vitamin distribution, and nutrition education.
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The document discusses demarcating households in Malaysia according to economic well-being. It analyzes income and consumption data to examine the composition of the bottom 40% (B40) households. The B40 is a heterogeneous group consisting of subgroups with different income levels. While B40 household incomes and share of total income have risen, their heads typically have lower education and skills. The document proposes revisiting the B40 definition to better target assistance programs.
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"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
Suzanne Spiteri’s recent report on improving the quality and accessibility of job postings to reduce employment barriers for neurodivergent people.
Decoding job postings: Improving accessibility for neurodivergent job seekers
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Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
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In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
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Resource Misallocation and Productivity Gaps in Malaysia
1. Resource Misallocation and Productivity
Gaps in Malaysia
Lay Lian Chuah, Norman V.Loayza and Ha Nguyen
June 7, 2018
2. Motivation
• Overarching question for development: Why are some countries’ productivity
high and some others’ low?
• A traditional candidate is technology.
- Policy implications include investing in innovation, FDI (technological
spillover), human capital etc
• New way of thinking:
- Resource misallocation1 (Restuccia and Rogerson (2008) , Hsieh and
Klenow (2009)). Policy implications are very different.
• Are markets generally good at allocating resources?
- Yes, within a distorted environment
Misallocation1
1See Banerjee and Duflo (2005) and Restuccia and Rogerson (2008)
3. Sources of Growth – A Review
Misallocation2
• Capital
• Labour
Increasing inputs
• Allocational (resources used in most
productive activities)
• Technical (more output from same inputs)
Increase efficiency
• New technologies
• Innovation
Increasing
productivity
4. Decomposing Sources of Growth
Misallocation3
Production Frontier 2
Production Frontier 1
Y
X
X1 X2
Y1
Y2
E2
E1
Increase in
technology
Y2-Y1 = Growth in output
E1 - E2=Growth from increasing efficiency
Z = Growth from increasing inputs from X1 to X2
T2-T1=Growth from technological change
Z
T1
Y1*
Y2*
T2
Y1’
Increase in inputs
Y2-Y1=E1-E2+Z+T2-T1
5. Growth Accounting Decomposition and Total Factor Productivity
(TFP)
Growth Accounting
Y=Akα(hL)1-α
where Y is GDP
A is total factor productivity (TFP)
K is physical capital stock
α is the output elasticity of physical capital
L is labour (number of workers)
h is the average level of human capital
Total Factor Productivity (TFP)
• TFP is the portion of output not explained by the amount of inputs used in production
• Differences are due to differences in technology or efficiency.
Misallocation4
Firm Workers + Machines = Output
Firm A 10 5 25
Firm B 10 5 35
6. Resource Misallocation – Distortions in Capital Market
Misallocation5
R* R*
Firm 1: Low Productivity Firm 2: High Productivity
Marginalrevenueproduct/
rentalrateofcapital
capital capital
R1
K1*
MRP
K2*
R2
K2
mK1
m
capital
capital
MRP
MRP
Marginalrevenueproduct/
rentalrateofcapital
Marginalrevenueproduct/
rentalrateofcapital
Marginalrevenueproduct/
rentalrateofcapital
𝝅 𝟏
𝝅 𝟐
𝝅 𝟏
𝒎
𝝅 𝟐
𝒎
7. Optimal Resource Allocation: Equalising Marginal Revenue Product
• An efficient economy is one where most firms in the same narrow industry have
the same marginal revenue product:
MRP1 = MRP2 = MRP
• An economy that's inefficient will be characterised by a large variance or kind of
wide distribution of marginal revenue products in the same industry
MRP1 ≠ MRP2 ≠ MRP
• Large potential gains to be made from reallocating resources more efficiently
Misallocation6
8. Misallocation Inferred from Distributions of “Revenue Productivity”
Misallocation7
• Wider dispersions for India
and China compared to the
US. This suggest:
• Larger variances in “revenue
productivity” for India and
China.
- Less efficient allocation
of resources.
- Larger distortions in
Indian and Chinese
economies.
More firms in the
left hand tail
More firms in
the left hand
tail
Source: Hsieh & Klenow (2009)
Distortions in allocation show up in the
variance of “revenue productivity”
across firms
𝑵𝒐𝒕𝒆: 𝑇𝐹𝑃𝑅 𝑠𝑖 ∝ (𝑀𝑅𝑃𝐾𝑠𝑖) 𝛼𝑠
(𝑀𝑃𝑅𝐿 𝑠𝑖)1−𝛼𝑠
9. Why Do We Observe Misallocation?
Why do some firms have more inputs than other firms – even when they have the
same technology?
Firms will hire labour and use capital until MPL = w and MRK = r. If that does not
happen (causing resource misallocation), it is possible that firms face different
prices.
How is that so?
• Government policies subsidies; taxes on inputs or outputs based on certain
characteristics.
o Discretionary government provisions eg. subsidized access to land or capital
for some firms; tax breaks or low interest rate loans
o Unfair bidding practices for government contracts, preferential treatment
(“crony capitalism”)
• Firm characteristics
o Location of firms which adds more to cost
o Firm size:
- Differential access to finance and labor market
- Differential pricing power
Misallocation8
10. Resource Misallocation and Productivity Gaps in Malaysia
(i) Empirical Framework - Hsieh & Klenow (2009)
• Main assumptions
• Empirical model – key equations
(ii) Data
• Description of firms in the census data
(iii) Results
• The degree of misallocation in Malaysian manufacturing sector
• Comparison of misallocation across selected countries
(iv) Policy Implications & Conclusion
11. Questions
• How important is misallocation as a source of productivity differences in
Malaysia? What is the extent of Malaysia’s productivity gaps compare to its
peers? Which sectors experienced the biggest distortions?
• If there is misallocation, what are the potential sources causing misallocation?
• What is the direct cost of misallocation on economic growth?
• What are the policy implications?
Misallocation10
12. Summary of Findings
• Productivity gains arising from a reallocation of resources is estimated to be
95% between 2010. Moving towards the US level of efficiency in 1997 shows
productivity gains of about 36%.
- Productivity gains of 60-95%, in 2000, 2005 and 2010 – suggest the “catch-
up” process remains a challenge.
• By sector, misallocation seems more severe in selected resource-based
industries (food and beverage and petroleum and chemical industries) and less
so, in the textile, machinery, electrical and electronics and computers industries.
• Both distortions in the capital and output markets are important sources of
productivity losses.
• Productivity gains if realised, adds to +0.4 to +1.3 ppt to overall growth.
Misallocation11
13. An Overview of Hsieh and Klenow (2009)
Why is aggregate China and India’s TFPs are lower than US?
- Traditional explanations focus on barriers to technology diffusion
- Misallocation explanation focuses on inefficient use of resources
(licensing regulations, size-dependent policies, SOEs)
Main findings
- Larger gaps in China and India than US
- Can account for about half of aggregate TFP differences
- Shrinking gaps in China but not India
- Large plants have large marginal products in China and India
Misallocation12
14. Hsieh and Klenow (2009) Empirical Framework
Assumptions:
CES demand function, monopolistic competition and Cobb Douglas production
function
• Absence of distortion, firms in the same sector have the same “revenue
productivity”.
• Differences in “revenue productivity” across firms must be due only to
distortions.
Misallocation13
15. Hsieh and Klenow (2009): Empirical Framework (cont.)
Each firm in the sector s has a production function:
𝑌𝑠𝑖 = 𝐴 𝑠𝑖 𝐾𝑠𝑖
𝛼𝑠
𝐿 𝑠𝑖
1−𝛼𝑠
(1)
Each establishment maximises current profits:
𝜋 𝑠𝑖 = 1 − 𝜏 𝑌𝑠𝑖 𝑃𝑠𝑖 𝑌𝑠𝑖 − 𝑤𝐿 𝑠𝑖 − 1 + 𝜏 𝐾𝑠𝑖 𝑅𝐾𝑠𝑖 (2)
where 𝑃𝑠𝑖 𝑌𝑠𝑖 is the firm's value added, w and R are the cost of one unit of labour
and capital respectively. 𝜏 𝑌𝑠𝑖 denotes firm-specific output distortions and 𝜏 𝐾𝑠𝑖 is
"capital" distortions.
Misallocation14
FOC:
𝐾 𝑠𝑖
𝐿 𝑠𝑖
=
1
𝑅
𝛼 𝑠
1−𝛼 𝑠
𝑤 𝑠𝑖
1+𝜏 𝑘𝑠𝑖
(3)
As a result of the wedges, firms produce different amounts than what would have been
dictated by their different capital-labour ratios.
16. Differences between physical TFP (TFPQ) and revenue TFP (TFPR)
15 Misallocation
Hsieh and Klenow (2009) define their productivity measures as follows:
𝑇𝐹𝑃𝑄𝑠𝑖 = 𝐴 𝑠𝑖 =
𝑌 𝑠𝑖
𝐾𝑠𝑖
𝛼 𝑠 𝐿 𝑠𝑖
1−𝛼 𝑠
(4)
𝑇𝐹𝑃𝑅 𝑠𝑖 = 𝑃𝑠𝑖 𝐴 𝑠𝑖 =
𝑃 𝑠𝑖 𝑌 𝑠𝑖
𝐾𝑠𝑖
𝛼 𝐿 𝑠𝑖
1−𝛼 𝑠
(5)
• TFPQ captures “physical productivity" while TFPR measures “revenue
productivity".
• In the framework, if there are no distortions, TFPR does not vary across
plants (firms) within an industry:
𝑃𝑠𝑗 ∗ 𝐴 𝑠𝑗 = 𝑃𝑠𝑖 ∗ 𝐴 𝑠𝑖 = ⋯ (6)
- More capital and labor should be allocated to plants with higher TFPQ up to the point
where their higher output results in a lower price. Hence their TFPRs equal to TFPRs of
smaller plants.
• In the framework: 𝑇𝐹𝑃𝑅 𝑠𝑖 ∝ (𝑀𝑅𝑃𝐾𝑠𝑖) 𝛼𝑠
(𝑀𝑃𝑅𝐿 𝑠𝑖)1−𝛼𝑠
17. Firm-specific TFPR with Distortions
• For each firm, TFPR can be calculated as:
𝑇𝐹𝑃𝑅 𝑠𝑖 =
𝜎
𝜎−1
𝑅
𝛼 𝑠
𝛼 𝑠 𝑤
1−𝛼 𝑠
1−𝛼 𝑠 (1+𝜏 𝐾𝑠𝑖) 𝛼 𝑠
1−𝜏 𝑌𝑠𝑖
(7)
where 𝜏 𝑌𝑠𝑖 is output “wedge” ; 𝜏 𝐾𝑠𝑖 is capital “wedge”.
- If 𝜏 𝐾𝑠𝑖=0 and 𝜏 𝑌𝑠𝑖=0, TFPR is equalised for all firms in sector s
𝑇𝐹𝑃𝑅 𝑠𝑖 =
𝜎
𝜎 − 1
𝑅
𝛼 𝑠
𝛼 𝑠
𝑤
1 − 𝛼 𝑠
1−𝛼 𝑠
- If 𝜏 𝐾𝑠𝑖>0 and 𝜏 𝑌𝑠𝑖>0, TFPR is larger (i.e. the firm is “taxed” more)
Misallocation16
MC
18. TFP Loss from Resource Misallocation
𝑌 𝑎𝑐𝑡𝑢𝑎𝑙
𝑌 𝑒𝑓𝑓
= ς 𝑠=1
𝑆 σ𝑖=1
𝑀𝑠 𝐴 𝑠𝑖
𝐴 𝑠
𝑇𝐹𝑃𝑅 𝑠
𝑇𝐹𝑃𝑅 𝑠𝑖
𝜎−1
𝜃 𝑠
𝜎−1
(9)
If 𝜏 𝐾𝑠𝑖=0 and 𝜏 𝑌𝑠𝑖=0, 𝑇𝐹𝑃𝑅 𝑠=𝑇𝐹𝑃𝑅 𝑠𝑖. Hence, 𝑌𝑎𝑐𝑡𝑢𝑎𝑙= 𝑌𝑒𝑓𝑓: no TFP loss from
misallocation:
Misallocation17
19. Data Treatment
Malaysia
• We use census data in 2000, 2005 and 2010 to assess the changes in productivity
gains from better allocation of resources across time.
- Census of manufacturing firms
- Approximately 17,500 firms in 2000; 27,300 in 2005; and 33,800 in 2010
- 55 industries (3 digit MSIC codes) – before trimming
- Truncate data by setting >10 employees as a threshold
• Other data treatment issues
- Labour compensation (wages+ benefits), employment, value-added
- Capital stock = constructed from investment
- Drop firms with no capital stock or labour compensation data
- Drop industries which are represented by less than 9 firms
- Trim 1% tails to get rid of outliers in the sample
Firm Level Productivity Study18
20. Distribution of firms by size
Misallocation19
.4
.3
.2
.1
0
Density
0 2 4 6 8 10
Log employment distribution
2010 2005
2000
.4
.3
.2
.1
0
Density
2 4 6 8 10
Log employment distribution
2010 2005
2000
Distributions of firms in the three census
periods
Distributions of firms at the threshold of
>10 employees
21. Construction of Capital Stock
Initial capital stock, 𝐾0 calculated as:
𝐾0 =
𝐼 𝑜
(𝑑+𝑔)
(10)
Where
𝐼0 =
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑣𝑎𝑙𝑢𝑒 𝑎𝑑𝑑𝑒𝑑
x value added at time t
𝑑 is the depreciation rate assumed to be 5%
𝑔 the growth rate of investment which is calculated from the data to be zero, in
other words, investment rate is constant across periods within a firm.
𝐾𝑡+5 = 𝐾𝑡−4 1 − 𝛿 + 𝐼𝑡+5 (11)
• The initial capital stock, 𝐾0 will be at the period which positive investment is
observed for a firm and therefore, the capital stock for the other periods will
either be iterated forward or backwards.
Equation (12) iterated backwards through repeated substitution of 𝐾𝑡−4
𝐾𝑡+5 = 𝐾0(1 − 𝛿)5
+ ҧ𝐼 (1 + 𝑔)(1 − 𝛿)4
+ ⋯ (12)
Misallocation20
22. Measurement/Calibration
Assigned parameters
• R=0.1 real rate 5%+ depreciation rate 5%
• σ=3 elasticity of substitution across producers in the same industry
• 1-α labour share in the corresponding US industry (*scaled up)
Inferred distortions
• 1+𝜏 𝐾𝑠𝑖=
𝛼 𝑠
1−𝛼 𝑠
𝑤𝐿 𝑠𝑖
𝑅𝐾 𝑠𝑖
capital wedge
• 1-𝜏 𝑌𝑠𝑖 =
𝜎
𝜎−1
1
(1−𝛼 𝑠)
𝑤𝐿 𝑠𝑖
𝑃 𝑠𝑖 𝑌 𝑠𝑖
output wedge
Misallocation21
23. A Large Proportion of Firms are in Non Resource Based Industries
and in Operations for > 6 years.
Misallocation22
Textile and apparel accounts for the largest
proportion of the firms (44%); followed by basic
metal and fabricated metal (17%).
The majority of firms are in operations for 6-15
years (38%); old firms accounted for 33%.
17.4
44.3
4.7
4.4
17.0
1.9
0.1
10.2
F&B Textile Wood
Petchem Metal M&E&C
Transport equip Others
Percent of firms by Industry, 2010* Percent of firms by age, 2010*
≤5 years,
29.1
≥6 to ≤15 years,
38.4
≥16 to ≤50
years, 31.9
>50 years,
0.7
≤5 years ≥6 to ≤15 years ≥16 to ≤50 years >50 years
*Note: applying >10 employees threshold
24. The Hypothetical Productivity Gains from Better Reallocation are
Estimated to be about 94%
23 Misallocation
Productivity gains from the better allocation remained between 60-95% in 2000 -
2010. A declining productivity gains would suggest an improvement in the
distribution of resources over time.
Distortions to capital improved while distortions to output worsen.
Moving to the efficiency levels of the US 1997 was about 36% in 2010.
Year No. of
obs.
TFPQ TFPR Wedge P.H
Gain 1
P.H.
Gain 2
SD 75–25 90–10 SD 75–25 90–10 Capital
SD
Output
SD
2000 7,698 1.0537 1.5096 2.7399 0.7564 0.9414 1.8666 1.6637 0.5713 61.22 12.82
2005 9,511 1.0738 1.4774 2.7769 0.7813 0.9685 1.9440 1.6427 0.5681 80.81 26.53
2010 7,412 1.1385 1.5394 2.9679 0.7843 1.0017 1.9591 1.6220 0.6002 93.95 35.72
25. TFPQ and TFPR Dispersions
24 Misallocation
TFPQ dispersions are getting slightly wider in 2010, less productive firms are getting even less
productive (left tail). The SD for TFPQ increased slightly to 1.14 in 2010, from 1.07 in 2005.
TFPR dispersions also show a similar pattern, slightly wider dispersions in the left tail.
0
.2
.4
.6
Density
-3 -2 -1 0 1 2 3
TFPR distribution
2010 2005
2000
0
.1
.2
.3
.4
Density
-5 -4 -3 -2 -1 0 1 2 3
TFPQ distribution
2010 2005
2000
26. Malaysia has Similar Levels of Resource Misallocation as China
25 Misallocation
Source: Authors’ calculations (2017), Cirera et al (2017), Nguyen et al (2016) and Hsieh and Klenow( 2009)
% TFP gains % TFP gains
TFP Gains from Moving to US Efficiency LevelsTFP Gains from Efficient Allocation of Resources
42.9
78.0
86.6
93.9
127.5
162.6
0
20
40
60
80
100
120
140
160
180
US
1997
TUR
2014
CHN
2005
MYS
2010
IND
1994
KEN
2010
24.5
30.5
35.7
59.2
83.8
0
10
20
30
40
50
60
70
80
90
TUR
2014
CHN
2005
MYS
2014
IND
1994
KEN 2010
27. Malaysia’s Estimated TFPQ and TFPR Dispersions are Comparable to
Turkey and India
26 Misallocation
Source: Authors’ calculations; Nguyen, Taskin, and Yilmaz (2016); Hsieh and Klenow (2009).
Note: Number of firms: Malaysia (7,412); Turkey (22,148); China (211,304); India (41,006).
1.1
0.8
1.1
0.8
1.0
0.6
1.2
0.7
1.5
1.0
1.5
1.0
1.3
0.8
1.6
0.8
3.0
2.0
2.9
1.9
2.4
1.6
3.1
1.6
T FP Q T FP R T FP Q T FP R T FP Q T FP R T FP Q T FP R
M A LA Y S I A ( 2 0 1 0 ) T U R K E Y ( 2 0 1 4 ) C H I N A ( 2 0 0 5 ) I N D I A ( 1 9 9 4 )
N = 7 4 1 2 N = 2 2 1 4 8 N = 2 1 1 3 0 4 N = 4 1 0 0 6
SD 75-25 90-10
28. Higher Productivity Gains from Better Reallocation are Estimated for
the Resource-Based Industries
27 Misallocation
% TFP gains
Source: Authors’ calculation
0
50
100
150
200
250
Average TFP gains
F&B Petchem Metal M&E&C Wood Transport equip Textile Manufacturing
30. Distortions in both Markets Appear to Affect Productivity
29 Misallocation
Productivity and Factor Market
Distortions
Productivity and Output Market
Distortions
Source: Authors’ calculation
31. Eliminating Distortions will Hypothetically Increase Growth by +0.4
to+1.3ppt
30 Misallocation
Source: Authors’ calculations and Eleventh Malaysia Plan (11MP).
Note: Top row = percentage point contribution to growth. Bottom row in brackets = percent contribution. 11MP = Eleventh Malaysia Plan; MA(3) = moving average
3; S1, S2, and S3 = Scenarios 1, 2, and 3, respectively; TFP = total factor productivity.
The assumption is that the manufacturing sector’s share of approximately 25% of the economy is also reflected in its share contribution to the aggregate TFP.
Calculated from the baseline growth of 5.8%.
Calculated from the baseline growth of 5%.
Baseline projections Baseline using 11MP Baseline using MA(3)
11 MP
(2016–20)
ARMA(p,q)
(2016–20)
S1 S2 S3 S1 S2 S3
Capital 2.6
(44.8)
2.2
(44.8)
2.6
(41.6)
2.6
(39.0)
2.6
(36.8)
2.2
(41.0)
2.2
(38.1)
2.2
(35.7)
Labor 0.9
(15.5)
0.8
(15.5)
0.9
(14.4)
0.9
(13.5)
0.9
(12.7)
0.8
(14.2)
0.8
(13.2)
0.8
(12.4)
Total factor
productivity
2.3
(39.7)
2.0
(39.7)
2.7
(44.0)
3.2
(47.5)
3.6
(50.4)
2.4
(44.8)
2.9
(48.7)
3.3
(51.9)
Gross domestic
product (%)
5.8 5.0 6.2 6.7 7.1 5.5 5.9 6.3
Additional
growth
+0.4a +0.9a
+1.3a +0.5b +0.9b +1.3b
32. Conclusion
31 Firm Level Productivity Study
• Malaysia shows relatively high dispersion in productivity of firms in the same
narrowly defined industry. This can be explained by misallocation of resources
across firms.
• Our estimates show that:
- Reducing distortions to the US level of efficiency could result in a
hypothetical aggregate productivity gain of 36%.
- A hypothetical productivity gain of 94% is estimated if distortions are
completely removed.
- Productivity gains are quite comparable with other upper-middle income
countries.
- Food and beverage firms operate in the most distorted market conditions.
- Both the input and output market distortions constrain productivity
• Broadly, there should be efforts to increase domestic competition and reduce
non-performance-based incentives.
• But, further investigation is needed to pin the sources of distortions.
• Results highlight the need to maintain the efforts to further ingrain productivity at
the core of policy making in Malaysia.