Abstract

This study examines Total Factor Productivity (TFP) growth of the Malaysian economy from 1971 to 2007. By using the method of Data Envelopment Analysis (DEA), this study estimates the contribution of technological change and technical efficiency change to the TFP growth and further identifies the determinants of TFP. The results from this study show that for the overall periods between the years 1971 and 2007, the contribution of technological change to TFP is higher than the contribution of technical efficiency change. Similar results are found for the periods 1971-1985 and 1999-2007. Only for the period 1986-1998, the contribution of technical efficiency change exceeds that of technological change. The study found that even though TFP growth is a significant contributor to the economic growth, but its contribution is still lower than the capital and labor. In contrast, capital is the most important contributor to the economic growth of Malaysia. Further, the result shows that the manufacturing output growth is the main contributor to the growth of TFP, followed by the percentage of foreign-owned companies. The percentage of workers with tertiary education is not a significant determinant of TFP growth despite having a positive and the highest coefficient.

Keywords:

Capital, labor, technical efficiency change, technological change, total factor productivity growth,

References

1. Baier, S.L., G.P. Dwyer and R. Tamura, 2002. How Important are Capital and Total Factor Productivity for Economic Growth? Working Paper, Federal Reserve Bank of Atlanta.
   
2. Bhatia, D.P., 1990. Misleading growth rates in the manufacturing sector of India. J. Income Wealth, 12: 222-25.
   
3. Cabanda, E., 2001. A Comparative Study of Asian Telecommunication Policy Reforms Japan, Malaysia and the Philippines. Asian Studies on the Pacific Coast: An Electronic Journal in Asian Studies.
   Direct Link
4. Coelli, T.J., 1994. A guide to Frontier version 4-1: A computer program for Stochastic Frontier Production and cost function estimation. Department of Economics, University of New England, Armidele, NSW2351 Australia.
   
5. Coelli, T.J., 1996. A guide to FRONTIER, version 4.1: A computer program for stochastic frontier production and cost function estimation. CEPA Working Paper 96/07, Department of Econometrics, University of New England, Armidale, NSW, 2351, Australia.
   
6. Correa, H., 1970. Sources of economic growth in Latin America. Southern Econ. J., 37: 17-31.
   CrossRef    
7. Denison, E.F., 1962. Education, economic growth and gaps in information. J. Polit. Econ., 70(5): 124-28.
   CrossRef    
8. Denison, E.F., 1967. Why Growth Rates Differ? The Brooking Institutions, Washington.
   
9. Fare, R.S., M.N. Grosskopf and Z. Zhang, 1994. Productivity growth, technical progress and efficiency changes in industrialized countries. Am. Econ. Rev., 30(3): 655-666.
   
10. Hicks, N., 1980. Economic growth and human resources. World Bank Staff Working Paper No. 408, July, pp: 1-34.
    
11. Idris, J., 2007. Determinants of total factor productivity growth in Malaysia. J. Econ. Cooperation, 28(3): 41-58.
    
12. Ikemoto, Y., 1986. Technical progress and the level of technology in Asian countries. Dev. Econ., 34-4: 368-390.
    
13. Jamison, D.T. and L.J. Lau, 1982. Farmer Education and Farm Efficiency. John Hopkins University Press, Baltimore, MD.
    PMCid:PMC371179    
14. Kartz, J.M., 1969. Production Functions, Foreign Investment and Growth: A Study Based on the Manufacturing Sector 1946-1961. North Holland Publishing Co., Amsterdam.
    
15. Lau, L.J., D.T. Jamison, S.C. Liu and S. Rivkin, 1993. Education and economic growth: Some cross-sectional evidence from Brazil. J. Dev. Econ., 41: 45-70.
    CrossRef    
16. Mahadevan, R., 2001. Assessing the output and productivity growth of Malaysia's manufacturing sector. J. Asian Econ., 12(4): 587-597.
    CrossRef    
17. Mahadevan, R., 2002. Is there a real TFP growth measure for Malaysia's manufacturing industries? Asean Econ. Bull., 19(2): 178-190.
    CrossRef    
18. MPC (Malaysian Productivity Corporation), 2008. Productivity reports. National Publication, Kuala Lumpur.
    
19. MPC (Malaysian Productivity Corporation), 2013. Productivity reports. National Publication, Kuala Lumpur.
    
20. Otani, I. and D. Villanueva, 1990. Long term growth in developing countries and its determinants: An empirical analysis. World Dev., 18(6): 769-783.
    CrossRef    
21. Solow, R.M., 1956. A contribution to the theory of economic growth. Q. J. Econ., 70: 65-94.
    CrossRef    
22. Solow, R.M., 1957. Technical change and the aggregate production function. Rev. Econ. Stat., 39: 312-20.
    CrossRef    
23. Squires, D. and C. Reid, 2004. Using Malmquist Indices to Measure Changes in TFP of Purse-seine Vessels While Accounting for Changes in Capacity Utilisation: The Resource Stock and the Environment. SCTB17 Forum Fisheries Agency, Working Paper (August 2004), pp: 1-15.
    
24. Tham, S.Y., 1997. Determinants of productivity growth in the Malaysian manufacturing sector. Asean Econ. Bull., 13(3): 333-343.
    CrossRef    
25. Walters, P.B. and R. Rubinson, 1983. Educational expansion and economic output in the U.S. 1890-1969: A production function analysis. Am. Soc. Rev., 48: 480-493.
    CrossRef    
26. World Bank, 1993. The East Asian miracles: Economic growth and public policy. Policy Research Report, Washington, DC.
    
27. Young, A., 1995. The tyranny of numbers: Confronting the statistical realities of the East Asian growth experience. Q. J. Econ., 110: 641-680.
    CrossRef    
28. Zaffrulla, H., 2007. Total Factor Productivity Performance, 1997-2006. Working Paper No. 30/2007, MPC, Petaling Jaya.
    

Competing interests

The authors have no competing interests.

Open Access Policy

This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

Copyright

The authors have no competing interests.