The first essay shows that when technological change is biased, a standard growth accounting exercise does not isolate the contribution of factor accumulation to output growth from that of technological change. This difficulty of identifying the independent contribution of technological progress is related to the path-dependence properties of the total factor productivity (TFP) index as a line integral. I apply the fundamental theorem of calculus for line integrals to prove that the TFP index is not path-dependent if and only technological change is Hicks-neutral. The intuition is that when technological change is biased, the output shares of payments to each factor will depend on the rate and bias of technological change. Since standard growth accounting exercises use the factor shares as estimates of factor elasticities, the residual measures of TFPG conflate the contribution of technological change with that of factor accumulation.
The second essay presents price-based (dual) estimates of total factor productivity growth (TFPG) for the East Asian countries. The dual estimates of TFPG for Singapore are higher than the primal estimates by about 2 percent a year. The basic reason is that despite the high rate of capital accumulation, there has been no appreciable decline in the real return to capital. Since real wages have increased rapidly without a corresponding fall in the return to capital, this implies a high rate of dual TFPG. I show that errors in the Singaporean national accounts, primarily overstatement of investment spending and undervaluation of the imputed rent on owner occupied housing in the official statistics, can explain the difference between the dual and primal estimates of TFPG for Singapore.
The third essay models the delay in a macroeconomic stabilization as an outcome of a bargaining game between two parties who must reach an agreement over how the stabilization costs is to be shared. I modify Alesina and Drazen's (1991) war of attrition model by endogenizing the distribution of the stabilization costs through a bargaining game. Using this bargaining framework, I analyze the role of crises and foreign assistance in bringing about a settlement to the distributional conflict.
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