Localized innovation and productivity growth in Asia: an intertemporal DEA approach

Recent contributions to growth theory stress the importance of localized innovation for the performance of more backward countries. In earlier papers, analyses by means of DEA techniques confirmed this intuition. In this paper, we extend this type of analysis by relaxing the macroeconomic viewpoint adopted until now. New databases on output, labor and capital input in the agricultural and manufacturing sector are developed for 40 countries. Using intertemporal DEA, it is found that changes in the global production frontier are localized at high levels of capital intensity. This result is stronger in agriculture than in manufacturing. Further, a decomposition of labor productivity growth in eight Asian countries for the period 1975-1992 into the effects of capital intensification, knowledge assimilation and innovation is made. The results suggest that there is a particular development path in which increases in capital intensity appear to be a prerequisite to benefit from international technology spillovers.