Is anything left of the debate about the sources of growth in East Asia 30 years later? A critical survey

We assess the debate about the sources of growth of Hong Kong, Korea, Singapore, and Taiwan that took place during the 1990s and early 2000s. The debate focused on the significance of total factor productivity growth relative to factor accumulation in explaining these economies’ high growth rates between the mid-1960s and the early 1990s. The initial growth accounting exercises found that the contribution of productivity growth was nil, a result that was questioned but that became accepted wisdom. This survey reviews three criticisms that questioned that result: (i) that technical progress was probably biased and not Hicks-neutral; (ii) that the dual of total factor productivity growth provided a better estimate than the primal; and (iii) that the estimates of total factor productivity growth captured a distributional accounting identity, rather than anything about productivity. Thirty years later, we conclude that the analysis of growth within the framework of the neoclassical model contributed much less to our understanding of East Asia’s growth than was initially thought. Instead, we argue that the literature on structural transformation, evolutionary theory of firm upgrading, and industrial policy, together with the balance-of-payments–constrained growth rate model, provide a much richer understanding of East Asia’s high growth rates.