Drivers of Developing Asia's Growth: Past and Future | Asian Development Bank

Drivers of Developing Asia's Growth: Past and Future

Publication | November 2010
Drivers of Developing Asia's Growth: Past and Future

This paper examines the sources of economic growth in 12 developing Asian countries during 1992–2007 and finds that total factor productivity growth has begun to play a bigger role in the region’s growth since 2002.

While developing Asia has recovered strongly from the global crisis, the region faces the medium- and long-term challenge of sustaining growth beyond the crisis. The central objective of this paper is to empirically investigate the sources of economic growth in 12 developing Asian economies during 1992–2007 via a two-stage analysis. In the first stage, the authors estimate total factor productivity growth (TFPG) and account for the relative importance of labor, capital, and TFPG in growth. In the second stage, they examine the effect of fundamental determinants of growth such as human capital on both economic growth and TFPG.

The most significant finding is that TFPG is becoming relatively more important as a source of developing Asia's growth. The results also confirm the relevance of supply-side factors, in particular human capital and openness to trade, for developing Asia's medium- and long-term growth. The overarching implication for policy makers is that supply-side policies that foster productivity growth will be vital for sustaining developing Asia's future growth in the postcrisis period.

Contents 

  • Abstract
  • Introduction: Sustaining Developing Asia's Growth Beyond the Global Crisis
  • Toward a New Asian Growth Paradigm?
  • Recent Patterns of Growth in Developing Asia: Growth Accounting
  • Explaining Output Growth and TFP Growth: Estimation of Growth Equations
  • Concluding Observations and Policy Implications
  • Appendixes
  • References