The Debate about the Sources of Growth in East Asia after a Quarter of a Century: much ado about nothing

Publication | May 2017
The Debate about the Sources of Growth in East Asia after a Quarter of a Century: much ado about nothing

The 1990s witnessed perhaps one of the most important debates in the history of growth and development on the sources of growth in East Asia.

This paper reviews what the profession has learnt during the last 25 years about East Asia’s growth using growth accounting exercises and estimations of production functions. The publication of Alwyn Young’s (1992, 1994, 1995) and Jong-Il Kim and Lawrence Lau’s (1994) studies, and Paul Krugman’s (1994) popularization of the “zero total factor productivity growth” thesis, led to a very important debate within the profession.

The paper demystifies this literature by pointing out a major methodological problem inherent in these approaches. To grasp this literature and the debates it engendered, it is necessary to understand how the notion of productivity and technical progress it refers to is calculated. We show that total factor productivity calculated with value data is not a measure of productivity. We conclude that the debate about the sources of growth in East Asia was much ado about nothing.

Contents 

  • Tables
  • Abstract
  • The Original Work on Total Factor Productivity Growth in East Asia
  • What Should We Make of East Asia’s Growth Accounting Exercises and Production Function Estimations?
  • A Reconsideration of the Debates about Productivity Growth in East Asia from the Accounting Identity Critique
  • What Lies Under The Accounting Identity Problem?
  • Conclusions: What Did We Learn From (And What is Left of) the Debates about the Sources of Growth in East Asia?