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

Jesus Felipe () and John McCombie

No 512, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This paper reviews what the profession has learned 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. This is that the variables used, namely, output, employment, the stock of capital, and the factor shares, are related definitionally through an accounting identity in value terms. As a consequence, results that are believed to reflect a true technological or production relationship are no more than the outcome of manipulating this identity. 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.

Keywords: accounting identity; dual TFP; East Asia; growth accounting; primal TFP; technical progress (search for similar items in EconPapers)
JEL-codes: O10 O47 O53 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2017-05-18
New Economics Papers: this item is included in nep-eff and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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