Skip to main content
SpringerLink
Log in

Economic Growth in EAGLE Emerging Economies: Exogenous or Endogenous?

  • Chapter
  • First Online:
Prediction and Causality in Econometrics and Related Topics (ECONVN 2021)

Part of the book series: Studies in Computational Intelligence ((SCI,volume 983))

Included in the following conference series:

  • 963 Accesses

Abstract

The role of capital with respect to labor is comprehensively analyzed in an AK type growth models. The traditional production functions such as the Cobb-Douglas or the CES (Constant Elasticity of Substitution) with an extremely restrictive assumption of the constant elasticity of factor substitution, used in many earlier studies, are unable to explore or explore incorrectly the impact of capital-labor interaction on economic growth and thus the nature of growth process, in particular, in a rapidly-developing economy. Therefore, this work employs an unrestricted VES (Variable Elasticity of Substitution) production function to estimate the elasticity of substitution between capital and labor varying with economic development for 15 Emerging and growth-leading economies (EAGLEs). The paper uses a VES production model given the fact that it is more appropriate over the CES and the Cobb-Douglas for countries experiencing the high rate of economic advancement (Thach 2020c). By applying a Bayesian non-linear regression through MCMC methods, the study finds the variable elasticities of capital-labor substitution to be greater than unity, inferring that the majority of the EAGLE economies, except for Nigeria, exhibit the possibility of endogenous growth.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 169.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 219.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 219.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

References

  • Anh, L.H., Dong, L.S., Kreinovich, V., Thach, N.N. (eds.): ECONVN 2018. SCI, vol. 760. Springer, Cham (2018). https://doi.org/10.1007/978-3-319-73150-6

    Book  Google Scholar 

  • Arrow, K.J., Chenery, H.B., Minhas, B.S., Solow, R.M.: Capital labour substitution and economic efficiency. Rev. Econ. Stat. 63, 225–250 (1961)

    Article  Google Scholar 

  • Azariadis, C.: Intertemporal Macroeconomics. Blackwell Publishers, Hoboken (1993)

    Google Scholar 

  • Bairam, E.: Capital-labour substitution and slowdown in Soviet economic growth: a re-examination. Bull. Econ. Res. 42, 63–72 (1990)

    Article  Google Scholar 

  • Bairam, E.: Learning-by-doing, variable elasticity of substitution and economic growth in Japan, 1878–1939. J. Dev. Stud. 25, 344–353 (1989)

    Article  Google Scholar 

  • Barro, R., Sala-i-Martin, X.: Economic Growth. McGraw-Hill, New York (1995)

    MATH  Google Scholar 

  • Briggs, W.M., Hung, T.N.: Clarifying ASA’s view on P-values in hypothesis testing. Asian J. Econ. Banking 3(2), 1–16 (2019)

    Google Scholar 

  • Bruton, H.J.: Innovations and equilibrium growth. Econ. J. 66, 455–466 (1956)

    Article  Google Scholar 

  • Cobb, C.W., Douglas, P.H.: A theory of production. Am. Econ. Rev. (1928). https://www.aeaweb.org/aer/top20/18.1.139-165.pdf

  • Diwan, R.K.: About the growth path of firms. Am. Econ. Rev. 60, 30–43 (1970)

    Google Scholar 

  • Duffy, J., Papageorgiou, K.: A cross-crountry empirical investigation of the aggregate production function specification. J. Econ. Growth 5, 87–120 (2000)

    Article  MATH  Google Scholar 

  • Erol, I., Guzel, A.: The elasticity of capital–land substitution in the housing construction sector of a rapidly urbanized city: evidence from Turkey. Rev. Urban Reg. Dev. Stud. 18(2), 85–101 (2006)

    Article  Google Scholar 

  • Federal Reserve Bank of St. Louis: Penn World Table (2019). https://fred.stlouisfed.org

  • Fellner, W.: Full use of underutilization: appraisal of long-run factors other than defense. Am. Econ. Rev. 44, 423–426 (1954)

    Google Scholar 

  • Galor, O.: Convergence? Inference from theoretical models. Econ. J. 106, 1056–1069 (1995)

    Article  Google Scholar 

  • Gordon, D.: The historical role of the production function in economics and business. Am. J. Bus. Educ. 4(4), 25–30 (2011)

    Google Scholar 

  • Hicks, J.R.: The Theory of Wages. Macmillan and Co., Ltd, London (1932)

    Google Scholar 

  • Hung, T.N., Trung, N.D., Thach, N.N.: Beyond traditional probabilistic methods in econometrics. In: Kreinovich, V., Thach, N.N., Trung, N.D., Van Thanh, D. (eds.) ECONVN 2019. SCI, vol. 809, pp. 3–21. Springer, Cham (2019). https://doi.org/10.1007/978-3-030-04200-4_1

    Chapter  Google Scholar 

  • Jones, L.E., Manuelli, R.E.: A convex model of equilibrium growth: theory and policy implications. J. Polit. Econ. 98, 1008–1038 (1990)

    Article  Google Scholar 

  • Jones, L.E., Manuelli, R.E.: Sources of growth. J. Econ. Dyn. Control 21, 75–114 (1997)

    Article  MATH  Google Scholar 

  • Karagiannis, G., Palivos, T., Papageorgiou, C.: Variable elasticity of substitution and economic growth: theory and evidence. In: Diebolt, C., Kyrtsou, C. (eds.) New Trends in Macroeconomics, pp. 21–37. Springer, Heidelberg (2005). https://doi.org/10.1007/3-540-28556-3_2

    Chapter  Google Scholar 

  • Kazi, U.A.: The variable elasticity of substitution production function: a case study from Indian manufacturing industries. Oxf. Econ. Pap. 32, 163–175 (1980)

    Article  Google Scholar 

  • Klump, R., La Grandville, O.: Economic growth and the elasticity of substitution: two theorems and some suggestions. Am. Econ. Rev. 90, 282–291 (2000)

    Article  Google Scholar 

  • Klump, R., Preissler, H.: CES production functions and economic growth. Scand. J. Econ. 102, 41–56 (2000)

    Article  Google Scholar 

  • Kreinovich, V., Thach, N.N., Trung, N.D., Van Thanh, D. (eds.): ECONVN 2019. SCI, vol. 809. Springer, Cham (2019). https://doi.org/10.1007/978-3-030-04200-4

    Book  Google Scholar 

  • La Grandville, O.: In quest of the slutsky diamond. Am. Econ. Rev. 79, 468–481 (1989)

    Google Scholar 

  • Lemoine, N.P.: Moving beyond noninformative priors: why and how to choose weakly informative priors in Bayesian analyses. Oikos 128, 912–928 (2019)

    Article  Google Scholar 

  • Liu, L., Yue, C.: Investigating the impact of SPS standards on trade using a VES model. Eur. Rev. Agric. Econ. 39(3), 511–528 (2012)

    Article  MathSciNet  Google Scholar 

  • Lovell, C.A.K.: Estimation and prediction with CES and VES production functions. Int. Econ. Rev. 14, 676–692 (1973a)

    Article  Google Scholar 

  • Lovell, C.A.K.: CES and VES production functions in a cross-section context. J. Polit. Econ. 81, 705–720 (1973b)

    Article  Google Scholar 

  • Lu, Y., Fletcher, L.B.: A generalization of the CES production function. Rev. Econ. Stat. 50, 449–452 (1968)

    Article  Google Scholar 

  • McFadden, D.: Estimation techniques for the elasticity of substitution and other production parameters. Contrib. Econ. Anal. 2, 73–123 (1978). North Holland

    Article  Google Scholar 

  • Meyer, R.A., Kadiyala, K.R.: Linear and nonlinear estimation of production functions. South. Econ. J. 40, 463–472 (1974)

    Article  Google Scholar 

  • Miller, E.: An Assessment of CES and Cobb-Douglas Production Functions. Congressional Budget Office, Washington (2008)

    Google Scholar 

  • Mishra, S.K.: A Brief History of Production Functions. MPRA Paper No. 5254 (2007). https://mpra.ub.uni-muenchen.de/5254/1/MPRA_paper_5254.pdf

  • Nerlove, M.: Recent empirical studies of the CES and related production functions. Theory Empirical Anal. Prod. 31, 55–136 (1967)

    Google Scholar 

  • Palivos, T., Karagiannis, G.: The Elasticity of Substitution in Convex Models of Endogenous Growth. Unpublished Manuscript (2004)

    Google Scholar 

  • Paul, S.: Labor Income Share Dynamics with Variable Elasticity of Substitution. IZA – Institute of Labor Economics, IZA DP No. 12418 (2019)

    Google Scholar 

  • Pereira, C.M.: Empirical essays on the elasticity of substitution, technical change, and economic growth. Ph.D. dissertation, North Carolina State University, Raleigh (2003)

    Google Scholar 

  • Pitchford, J.D.: Growth and the elasticity of substitution. Econ. Rec. 36, 491–503 (1960)

    Article  Google Scholar 

  • Revankar, N.S.A.: Class of variable elasticity of substitution production functions. Econometrica 39, 61–71 (1971a)

    Article  MATH  Google Scholar 

  • Revankar, N.S.: Capital-labour substitution, technological change, and economic growth: the U.S. experience, 1929–1953. Metroeconomica 23, 154–176 (1971b)

    Article  Google Scholar 

  • Roberts, G.O., Rosenthal, J.S.: Optimal scaling for various Metropolis-Hastings algorithms. Stat. Sci. 16, 351–367 (2001)

    Article  MathSciNet  MATH  Google Scholar 

  • Romer, P.M.: Increasing returns and long-run growth. J. Polit. Econ. 94(5), 1002–1037 (1986)

    Article  Google Scholar 

  • Romer, P.M.: Crazy Explanations for the Productivity Slowdown, NBER Macroeconomics Annual. MIT Press, Cambridge (1987)

    Google Scholar 

  • Sato, K.: Growth and the elasticity of factor substitution: a comment – how plausible is imbalanced growth. Econ. Rec. 39, 355–361 (1963)

    Article  Google Scholar 

  • Sato, R., Hoffman, F.: Production functions with variable elasticity of substitution: some analysis and testing. Rev. Econ. Stat. 50, 453–460 (1968)

    Article  Google Scholar 

  • Sriboonchitta, S., Nguyen, H.T., Kosheleva, O., Kreinovich, V., Nguyen, T.N.: Quantum approach explains the need for expert knowledge: on the example of econometrics. In: Kreinovich, V., Sriboonchitta, S. (eds.) TES 2019. SCI, vol. 808, pp. 191–199. Springer, Cham (2019). https://doi.org/10.1007/978-3-030-04263-9_15

    Chapter  Google Scholar 

  • Svítek, M., Kosheleva, O., Kreinovich, V., Nguyen, T.N.: Why quantum (wave probability) models are a good description of many non-quantum complex systems, and how to go beyond quantum models. In: Kreinovich, V., Thach, N.N., Trung, N.D., Van Thanh, D. (eds.) ECONVN 2019. SCI, vol. 809, pp. 168–175. Springer, Cham (2019). https://doi.org/10.1007/978-3-030-04200-4_13

    Chapter  Google Scholar 

  • Temple, J.: The calibration of CES production functions. J. Macroecon. 34, 294–303 (2012)

    Article  Google Scholar 

  • Thach, N.N.: Endogenous economic growth: the Arrow-Romer theory and a test on Vietnamese economy. WSEAS Trans. Bus. Econ. 17, 374–386 (2020a)

    Article  Google Scholar 

  • Thach, N.N.: How to explain when the ES is lower than one? A Bayesian nonlinear mixed-effects approach. J. Risk Financ. Manag. 13(2), 21 (2020b)

    Article  MathSciNet  Google Scholar 

  • Thach, N.N.: The variable elasticity of substitution function and endogenous growth: an empirical evidence from Vietnam. Int. J. Econ. Bus. Adm. 8(1), 263–277 (2020c)

    Google Scholar 

  • Thach, N.N., Kreinovich, V., Trung, N.D. (eds.): Data Science for Financial Econometrics. SCI, vol. 898. Springer, Cham (2021). https://doi.org/10.1007/978-3-030-48853-6

    Book  MATH  Google Scholar 

  • Tsang, H.H., Yeung, P.: A generalized model for the CES-VES family of production function. Metroeconomica 28, 107–118 (1976)

    Article  MATH  Google Scholar 

  • World Bank: World Development Indicators (2019). http://datatopics.worldbank.org/worlddevelopmentindicators/

  • Zellner, A., Ryu, H.: Alternative functional forms for production, cost and returns to scale functions. J. Appl. Economet. 13, 101–127 (1998)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Institute for Research Science and Banking Technology, Banking University HCMC, 36 Ton That Dam, District 1, Ho Chi Minh City, Vietnam

    Nguyen Ngoc Thach

  2. Department of Planning and Investment of Ho Chi Minh City, 32 Le Thanh Ton, District 1, Ho Chi Minh City, Vietnam

    Tran Anh Tuan

  3. Ho Chi Minh Industry and Trade College, 20 Tang Nhon Phu, District 9, Ho Chi Minh City, Vietnam

    Nguyen Tran Xuan Linh

  4. Vietnam Maritime Commercial Joint Stock Bank, 511 Huynh Tan Phat, District 7, Ho Chi Minh City, Vietnam

    Huynh Thi Tuyet Ngan

Authors
  1. Nguyen Ngoc Thach
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Tran Anh Tuan
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Nguyen Tran Xuan Linh
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Huynh Thi Tuyet Ngan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Nguyen Ngoc Thach .

Editor information

Editors and Affiliations

  1. Banking University Ho Chi Minh City, Ho Chi Minh, Vietnam

    Nguyen Ngoc Thach

  2. Banking University of Ho Chi Minh City, Ho Chi Minh, Vietnam

    Doan Thanh Ha

  3. Banking University of Ho Chi Minh City, Ho Chi Minh, Vietnam

    Nguyen Duc Trung

  4. Computer Science Department, University of Texas at El Paso, El Paso, TX, USA

    Vladik Kreinovich

Rights and permissions

Reprints and permissions

Copyright information

© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Ngoc Thach, N., Tuan, T.A., Linh, N.T.X., Ngan, H.T.T. (2022). Economic Growth in EAGLE Emerging Economies: Exogenous or Endogenous?. In: Ngoc Thach, N., Ha, D.T., Trung, N.D., Kreinovich, V. (eds) Prediction and Causality in Econometrics and Related Topics. ECONVN 2021. Studies in Computational Intelligence, vol 983. Springer, Cham. https://doi.org/10.1007/978-3-030-77094-5_24

Download citation

Publish with us

Policies and ethics

Search

Navigation