Why has Thailand grown faster than Indonesia since the 1960s? Differential technological progress offers a more satisfactory explanation than initial conditions, factor endowment or long-run macroeconomic stability. The argument is supported by a brief survey of related topics such as factor productivity, structural change, access to new technology through foreign trade and investment, R & D expenditure and the institutional framework of technology policy. The twin theme of a time-lag hypothesis and country-specific characteristics of technological progress emerges from these discussions.
Indonesia lagged behind Thailand by about ten years, or slightly more, on several accounts including per capita GDP growth, value-added in manufacturing, exports of capital goods and application of medium- or high-level technology in manufacturing production. It is worth noting that some of these variables are directly connected to the pace of technological progress. The important question, however, is whether the observed difference is more than a time-lag, i.e. will Indonesia simply follow the Thai example in due course? To an extent this will surely happen but there is reason to