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Recent growth accounting studies of Hong Kong, Singapore, Taiwan and South Korea have found that the Solow residuals in these economies were relatively small. Given the high capital contributions, these results are often interpreted as evidence that factor accumulation, savings and investment were the principal cause of the East Asian miracle. This paper develops an alternative method of analysing these data, combining growth accounting methods with the linearized neoclassical growth model of Mankiw et al. (1992). The method explicitly quantifies the extent to which increases in productivity, as measured by the Solow residual, induced capital accumulation in these economies. It shows that in Hong Kong, Taiwan and South Korea, productivity growth contributed between half and two‐thirds of the growth in GDP per worker over a 20‐year period.

Abstract We revisit the benefits of the Australia–US Free Trade Agreement (AUSFTA) and, in particular, evaluate the insurance value of this agreement in the face of regional and global trade wars. The insurance benefits are quantified by comparing the AUSFTA against alternative scenarios where some or all regions raise tariffs by 10 percentage points. Issues regarding expectations and the timing of potential trade wars are considered by using a dynamic model. The potential gains relative to these alternative trade war status quo scenarios are found to be as much as four times larger than the traditional efficiency gains.

Countries that experience 'growth miracles' often exhibit rising investment rates and large intersectoral resource transfers. But how important are these factors to this process? We consider this question using a two‐sector growth model with a segmented labour market. Numerical simulations show that a doubling of the investment rate can generate a significant intersectoral re‐allocation of labour and can have a large impact on aggregate output per worker. Under our baseline parameter values, the effect of the investment rate on per capita incomes is amplified by 25–50 per cent, relative to a standard one‐sector growth model.