Technological Development and Economic Growth in Indonesia and Thailand since 1950

This paper compares long-run economic growth in Indonesia and Thailand as related to technological progress during the second half of the twentieth century. It adopts a two-stage approach. It first provides an estimation of long-run total factor productivity differentials between the two countries then offering an in-depth analysis of this differential and associated trends and policies concerning, amongst others, capital goods imports, foreign direct investment and R&D expenditure. The paper argues that technological progress shaped by official policies and the institutional framework of absorption sufficiently explains why outcomes have differed so substantially in Thailand and Indonesia despite apparently similar initial conditions of long-run economic growth. Macroeconomic policies need to pay explicit attention to the acquisition of modern technologies in order for rapid economic growth to be sustained.