Economic Growth in East Asia

Contribution of Technical Progress
to Economic Growth

Data and source

While output growth in the high performance East Asian economies has been exceptionally rapid, these countries have not experienced exceptionally rapid technical progress. Technical progress in an economic sense means producing more output from given inputs. One measure of technical progress is total factor productivity. As the above chart shows, total factor productivity growth from 1960-1992 was negative in Sub-Sahara Africa and the Middle East, and nearly zero in Latin America. Total factor productivity growth accounted for only 12% of output growth in East Asia (excluding China and Japan) and was less significant to growth in East Asia than to growth in South Asia and in the high-income industrialized countries. Moreover, the absolute magnitude of total factor productivity growth in East Asia, estimated at 0.7% per year, was 30% lower than total factor productivity growth in the industrialized economies.

Data and source

The finding that technical progress in the high performance East Asian economies is less significant than in the high income industrialized economies has recurred across studies using different data and estimation techniques. A recent study, which explicitly estimated a production function more general than that typically assumed in growth accounting studies, found that the data do not reject the hypothesis that technical progress was zero in Hong Kong, Singapore, the Republic of Korea, and Taiwan/China from about 1960 to 1990. The data do reject the hypothesis that productivity growth was zero in France, West Germany, Japan, the United Kingdom, and the U.S. during this period. The estimated magnitudes, shown in the chart above, indicate that technical progress had a relatively less significant contribution to growth in East Asia than to growth in the industrialized economies.

Economic Growth in East Asia