Empirical evidence on the determinants of TFP and its role in the growth of innovation-driven economies

Abstract

This paper provides some empirical evidence for R&D stock,

openness, and economic freedom that foster the growth of TFP.

However, it finds no empirical evidence for markup price and nonconstant

returns to scale, implying the growth rate of TFP measured

as the Solow residual reflects the true productivity growth. In

addition, it also suggests empirical evidence for the enlarged role

of TFP in the growth of innovation-driven economies by exploring

two dynamic panel models specifying the relationship among TFP,

investment, and employment. Based on these main findings, I

suggest a few policy implications for Korea to fully utilize the role

of TFP in the growth of the Korean economy that is transitioning

to or has already transitioned to an innovation-driven economy.