1. Productivity Growth and Resource Reallocation Effects in Taiwan: Tsu-tan Fu, Soochow University Yih-ming Lin, National Chiayi University Chi-ting Lee, Soochow University The Forth Asia KLEMS Conference, Hitotsubashi University, Tokyo, Japan, July 31-August 1, 2017

2. Progress for the past two years
Update: 93SNA  08SNA
Update: 

3. Motivation of this research
After 1987, Taiwan have experienced a huge industry structure change. The share of primary and secondary sector decreased and the share of tertiary sector increased to almost 70%.
The slowdown of Taiwan Economic growth.

4. Purpose of this research
To examine growth dynamics at industry level during using Taiwan KLEMS database..
To analyze the reallocation effects of resources in Taiwan

5. Methodology: KLEMS Growth Accounts

6. KLEMS Growth Accounts

7. Growth Accounts

8. Growth Accounts

9. Taiwan KLEMS Database Outputs (GO, VA): INPUTS (K, L, II, E, M, S):
Time period:
30 sectors (1-30 industries in Asia KLEMS manual, skip sectors)
Outputs (GO, VA):
GO = II+ VA (Gross output = intermediate inputs + value added)
Using National Income Survey data (08 SNA released by DGBAS,2015)
INPUTS (K, L, II, E, M, S):
K = capital service
L = labor (working hour)
II = intermediate inputs (Energy, Material, Service)

10. Methodology: Production possibility frontier
∆ ln 𝑉= 𝑗 𝑤 𝑗 ∆ ln 𝑉 𝑗
Where Vj is the industry value added and wj is the share of industry value added in the aggregate
𝑤 𝑗 = 𝑃 𝑉,𝑗 𝑉 𝑗 𝑗 𝑃 𝑉,𝑗 𝑉 𝑗
𝑣 𝑇 ≡∆ ln 𝑉 − 𝑣 𝐾 ∆ ln 𝐾− 𝑣 𝐿 ∆ ln 𝐿
Where 𝑣 𝑇 is ∆TFP of Production possibility frontier approach

11. Methodology: Direct Aggregation across industries
∆ ln 𝑌 𝑗 = 𝑣 𝐾,𝑗 ∆ln 𝐾 𝑗 + 𝑣 𝐿,𝑗 ∆ ln 𝐿 𝑗 + 𝑣 𝑋,𝑗 ∆ ln 𝑋 𝑗 + 𝑣 𝑇,𝑗
𝑌 𝑗 is gross output of industy j, 𝑣 𝑇,𝑗 is the TFP of industry j
∆ ln 𝑌 𝑗 = 𝑣 𝑉,𝑗 ∆ ln 𝑉 𝑗 + 𝑣 𝑋,𝑗 ∆ ln 𝑋 𝑗
∆ ln 𝑉 𝑗 = 𝑣 𝐾,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐾 𝑗 + 𝑣 𝐿,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐿 𝑗 𝑣 𝑉,𝑗 𝑣 𝑇,𝑗
∆ ln 𝑉≡ 𝑗 𝑤 𝑗 ∆ ln 𝑉 𝑗 = 𝑗 ( 𝑤 𝑗 𝑣 𝐾,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐾 𝑗 + 𝑤 𝑗 𝑣 𝐿,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐿 𝑗 + 𝑤 𝑗 𝑣 𝑉,𝑗 𝑣 𝑇,𝑗 )

12. 𝑣 𝑇 = 𝑗 𝑤 𝑗 𝑣 𝑉,𝑗 𝑣 𝑇,𝑗 + 𝑗 𝑤 𝑗 𝑣 𝐾,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐾 𝑗 − 𝑣 𝐾 ∆ ln 𝐾 𝑗 𝑤 𝑗 𝑣 𝐾,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐾 𝑗 − 𝑣 𝐾 ∆ ln 𝐾 + 𝑗 𝑤 𝑗 𝑣 𝐿,𝑗 𝑣 𝑉,𝑗 ∆ ln 𝐿 𝑗 − 𝑣 𝐿 ∆ ln 𝐿 = 𝑗 𝑤 𝑗 𝑣 𝑉,𝑗 𝑣 𝑇,𝑗 + 𝑅𝐸𝐴𝐿𝐿 𝐾 + 𝑅𝐸𝐴𝐿𝐿 𝐿
𝑅𝐸𝐴𝐿𝐿 𝐾 Reallocation of capital
𝑅𝐸𝐴𝐿𝐿 𝐿 Reallocation of labor

13. Figure 1: Industrial structure of Taiwan: 1981-2015
1987 is the year of industrial structure turning in Taiwan. Labor intensive manufacturing industries moved to produce overseas. Primary sector and secondary sector decreased. Tertiary sector increased up to about 67%.

14. Industry classification code and VA weights (Primary & Secondary)
unit:%
Sector
Industry number
1981
1990
2000
2010
2015
Primary
1.Agriculture, hunting and forestry
7.95
4.29
2.09
1.68
1.79
2.Mining and quarrying
0.83
0.32
0.24
0.14
0.11
Secondary
3.Food products, beverages and tobacco
2.47
1.81
0.78
0.73
0.79
4.Textiles, textile products, leather and footwear
7.13
4.57
1.91
0.95
0.98
5.Wood and products of wood and cork
0.66
0.41
0.08
0.07
6.Pulp, paper, paper products, printing and publishing
1.61
1.31
0.57
7.Coke, refined petroleum products and nuclear fuel
1.30
1.18
1.40
1.15
1.10
8.Chemicals and chemical products
2.58
2.92
2.34
3.28
2.70
9.Rubber and plastics products
1.46
2.15
1.29
0.88
1.01
10.Other non-metallic mineral products
1.93
1.57
0.89
0.74
11.Basic metals and fabricated metal products
3.13
4.11
3.62
3.56
12.Machinery, nec
1.02
1.32
1.22
1.44
1.66
13.Electrical and optical equipment
4.56
5.89
9.34
14.18
16.16
14.Transport equipment
2.49
2.51
1.64
1.35
1.54
15.Manufacturing nec; Recycling
2.90
2.07
1.06
0.81
0.91
16.Electricity, gas and water supply
4.78
3.23
2.24
2.08
17.Construction
4.67
2.75
2.66

15. Table 1-2: Industry classification code and VA weights (Taiwan)
(Tertiary)
unit:%
Sector
Industry number
1981
1990
2000
2010
2015
Tertiary
18.Sale, maintenance and repair of motor vehicles
1.23
2.56
1.55
1.57
1.54
19.Wholesale trade and commission trade
6.54
6.12
9.31
10.38
9.89
20.Retail trade, except of motor vehicles and motorcycles
6.36
5.88
7.15
6.07
6.10
21.Hotel and restaurants
0.93
1.70
2.10
2.20
2.69
22.Transport and storage
4.42
4.47
3.95
2.97
2.99
23.Post and telecommunications
1.72
1.81
1.92
1.65
Fast
24.Financial intermediation
4.14
7.90
8.58
6.53
6.92
Growing
25.Real estate activities
5.24
6.46
8.82
8.90
8.60
Industry
26.Renting of m&eq and other business activities
1.90
2.23
3.68
4.73
4.70
27.Public admin and defence; Compulsory social security
9.39
9.44
8.32
7.75
6.75
28.Education
2.88
3.15
4.30
4.90
4.43
29.Health and social work
0.79
2.68
2.94
3.13
30.Other community, social and personal services
1.76
2.27
2.96
2.80
Industries #19, 20, and 24, 25, 26,27 are service industries with fast growing and high Value-Added weights. They are Trade related & ICT using industries.

16. Growth rate of Gross output , 198,1991, 2001, 2011

17. TFP growth rate 30 industry 1981- 1990 1991- 2000 2001- 2010 2011-
2015
Primary
1.AGRICULTURE, HUNTING, FORESTRY AND FISHING
1.46
(1.81)
4.10
(3.13)
0.60
Secondary
2.MINING AND QUARRYING
2.53
(8.41)
(11.78)
(12.88)
(7.16)
3.FOOD , BEVERAGES AND TOBACCO
1.72
3.05
(2.74)
3.92
1.12
4.TEXTILES, TEXTILE , LEATHER AND FOOTWEAR
(0.05)
(5.53)
3.12
(3.32)
(1.21)
5.WOOD AND OF WOOD AND CORK
2.04
3.57
(1.67)
(4.68)
0.41
6.PULP, PAPER, PAPER , PRINTING AND PUBLISHING
(1.23)
1.87
1.76
2.95
1.18
7.Coke, refined petroleum and nuclear fuel
(1.16)
(6.28)
4.15
(11.08)
(2.56)
8.Chemicals and chemical products
1.67
4.58
(0.66)
11.27
3.25
9.Rubber and plastics
2.41
(0.73)
(0.09)
(10.63)
(1.17)
10.OTHER NON-METALLIC MINERAL
0.88
(0.90)
6.00
(2.94)
1.30
11.BASIC METALS AND FABRICATED METAL
(0.00)
(6.18)
0.31
(2.30)
12.MACHINERY, NEC
1.68
0.02
0.94
(4.25)
0.10
13.ELECTRICAL AND OPTICAL EQUIPMENT
2.01
0.93
5.18
4.96
3.06
14.TRANSPORT EQUIPMENT
(0.65)
(3.78)
2.67
1.03
(0.35)
15.MANUFACTURING NEC; RECYCLING
(1.79)
(1.94)
2.35
(0.76)
16.ELECTRICITY, GAS AND WATER SUPPLY
1.88
6.49
(8.35)
0.50
17.CONSTRUCTION
0.17
1.04
(2.54)
(4.55)
(1.07)

18. TFP growth rate 30 industry 1981- 1990 1991- 2000 2001- 2010 2011-
2015
Tertiary
18.Sale, maintenance and repair of motor vehicles and motorcycles; retail sale of fuel
(2.12)
2.83
(2.50)
2.14
(5.74)
19.Wholesale trade and commission trade, except of motor vehicles and motorcycles
3.70
4.77
(1.49)
0.77
2.06
20.Retail trade, except of motor vehicles and motorcycles; repair of household goods
2.96
3.42
(7.66)
3.23
0.01
21.HOTELS AND RESTAURANTS
5.01
1.32
(0.54)
(3.60)
1.02
22.TRANSPORT AND STORAGE
1.08
1.17
4.47
(0.15)
1.92
23.POST AND TELECOMMUNICATIONS
4.14
8.36
7.98
2.41
6.25
24.FINANCIAL INTERMEDIATION
6.73
0.27
5.80
(1.81)
3.30
25.Real estate activities
6.60
(1.02)
9.90
(9.78)
2.92
26.Renting of m&eq and other business activities
(4.97)
(1.76)
2.81
(1.65)
(1.25)
27.PUBLIC ADMIN AND DEFENCE; COMPULSORY SOCIAL SECURITY
1.74
0.80
(1.55)
0.98
28.EDUCATION
3.38
2.89
3.34
(0.71)
2.62
29.HEALTH AND SOCIAL WORK
6.36
2.43
2.58
(1.31)
30.OTHER COMMUNITY, SOCIAL AND PERSONAL SERVICES
2.69
(3.85)
4.07
(1.90)
0.50

20. ICT-USING industries Reallocation Effects (1)
Reallocation of Capital Input
PULP, PAPER, PAPER , PRINTING AND PUBLISHING
0.065
0.009
0.001
(0.001)
MACHINERY, NEC
0.020
0.026
(0.002)
0.007
MANUFACTURING NEC; RECYCLING
0.087
0.032
0.012
0.011
Reallocation of Labor Input
0.015
(0.000)
(0.006)
0.008
0.010
0.025
0.042
(0.053)
0.005

21. ICT-USING industries Reallocation Effects (2)
Reallocation of Capital Input
Sale, maintenance and repair of motor vehicles and motorcycles; retail sale of fuel
0.019
(0.016)
(0.006)
(0.005)
Wholesale trade and commission trade, except of motor vehicles and motorcycles
(0.033)
(0.003)
(0.073)
Retail trade, except of motor vehicles and motorcycles; repair of household goods
(0.021)
(0.018)
(0.001)
FINANCIAL INTERMEDIATION
0.069
(0.076)
0.026
(0.054)
Renting of m&eq and other business activities
(0.030)
(0.059)
(0.025)
(0.061)
Reallocation of Labor Input
(0.008)
(0.013)
0.009
(0.081)
(0.029)
(0.046)
(0.069)
(0.063)
(0.050)
0.024
0.003
(0.067)
(0.110)
(0.017)
(0.093)
(0.075)
(0.049)

22. ICT Producing Industries-Reallocation effects
Reallocation of Capital Input
ELECTRICAL AND OPTICAL EQUIPMENT
OPTICAL EQUIPMENT
0.120
0.249
0.375
0.183
POST AND TELECOMMUNICATIONS
0.034
0.033
0.015
(0.000)
Reallocation of Labor Input
0.099
0.050
0.052
0.020
0.011
0.000
0.012
0.003

23. NON-ICT-Reallocation of Capital Input
Reallocation of Capital Input
AGRICULTURE, HUNTING, FORESTRY AND FISHING
0.440
0.236
(0.014)
0.079
MINING AND QUARRYING
0.001
0.000
(0.001)
FOOD , BEVERAGES AND TOBACCO
0.074
(0.011)
(0.015)
(0.018)
TEXTILES, TEXTILE , LEATHER AND FOOTWEAR
0.131
0.028
0.002
(0.004)
WOOD AND OF WOOD AND CORK
0.010
(0.006)
0.003
Coke, refined petroleum and nuclear fuel
0.142
0.153
0.051
Chemicals and chemical products
0.375
0.229
0.078
0.019
Rubber and plastics
0.073
0.038
0.014
0.026
OTHER NON-METALLIC MINERAL
0.085
0.072
0.007
0.018
BASIC METALS AND FABRICATED METAL
0.134
0.084
0.023
TRANSPORT EQUIPMENT
0.120
0.127
ELECTRICITY, GAS AND WATER SUPPLY
0.196
0.119
0.016
CONSTRUCTION
0.096
0.047
0.036
0.020
HOTELS AND RESTAURANTS
0.029
0.032
0.062
TRANSPORT AND STORAGE
0.076
0.116
(0.028)
0.033
Real estate activities
0.349
1.241
(0.120)
0.331
PUBLIC ADMIN AND DEFENCE; COMPULSORY SOCIAL SECURITY
(0.166)
(0.279)
0.015
EDUCATION
(0.065)
(0.073)
HEALTH AND SOCIAL WORK
(0.008)
0.024
0.021
OTHER COMMUNITY, SOCIAL AND PERSONAL SERVICES
0.006
0.061
0.037

24. NON-ICT industries-Reallocation of Labor Input
Reallocation of Labor Input
AGRICULTURE, HUNTING, FORESTRY AND FISHING
(0.021)
(0.010)
0.001
MINING AND QUARRYING
(0.009)
(0.005)
(0.004)
0.000
FOOD , BEVERAGES AND TOBACCO
0.006
0.003
TEXTILES, TEXTILE , LEATHER AND FOOTWEAR
(0.020)
(0.043)
(0.017)
WOOD AND OF WOOD AND CORK
(0.013)
(0.002)
Coke, refined petroleum and nuclear fuel
(0.001)
Chemicals and chemical products
0.012
0.008
0.002
0.022
Rubber and plastics
0.013
(0.019)
(0.014)
0.005
OTHER NON-METALLIC MINERAL
(0.007)
0.010
BASIC METALS AND FABRICATED METAL
0.036
0.026
TRANSPORT EQUIPMENT
0.016
ELECTRICITY, GAS AND WATER SUPPLY
0.009
(0.003)
CONSTRUCTION
0.023
0.038
HOTELS AND RESTAURANTS
0.028
0.030
0.015
TRANSPORT AND STORAGE
0.019
Real estate activities
0.011
0.007
PUBLIC ADMIN AND DEFENCE; COMPULSORY SOCIAL SECURITY
0.132
0.047
EDUCATION
0.060
0.072
0.025
0.021
HEALTH AND SOCIAL WORK
0.035
OTHER COMMUNITY, SOCIAL AND PERSONAL SERVICES
0.066
0.080

25. Reallocation Effects of Capital and Labor Input
Reallocation of Capital Input
ICT-Using-Manufacturing
0.173
0.067
0.011
0.017
ICT-Using-Service
0.022
(0.202)
(0.010)
(0.225)
ICT-Producing-Manufacturing
0.120
0.249
0.375
0.183
ICT-Producing-Service
0.034
0.033
0.015
(0.000)
NONICT
2.099
2.236
0.131
0.666
Reallocation of Labor Input
0.058
(0.043)
0.012
0.038
(0.312)
(0.269)
(0.105)
(0.119)
0.099
0.050
0.052
0.020
0.000
0.003
0.394
0.185
0.053
0.164

26. 1981-1990,TFP、Reallocation Effect of Capital and labor

27. 1991-2000,TFP、Reallocation Effect of Capital and labor

28. 2001-2010,TFP、Reallocation Effect of Capital and Labor input

29. 2011-2015,TFP、Reallocation Effect of Capital and Labor Input

30. Industry Contributions to VA growth, 1981-2015

31. Industry Contributions to TFP growth, 1981-2015

32. Findings (1)
The empirical results show that Taiwan also experienced the problems of slowdown of TFP growth in the period of and
The reallocation effects of capital input are very high before 2000, especially in NON-ICT industries.

33. Findings (2)
However, after 2000, the reallocation effects of capital input decrease except ICT-producing industries.
The reallocation effects of labor input are negligible or negative, especially in the ICT using industries.
The reallocation effects of labor are still remain positive in ICT producing industries.

34. Findings (3)
Among the 30 industries, Electrical and optical equipment (13) Chemicals and chemical products (8), Real estate activities (25), Financial intermediation (24) and Wholesale trade and commission trade, except of motor (19) are ranked the top 5 industries for contributions to value-added growth and TFP growth,

35. Thank you for your attention. Comments are welcome!