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Identifying the sources of economic growth in Sri Lanka under trade liberalization: the primal and dual total factor productivity growth

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  • Ranpati Dewage Thilini Sumudu Kumari
  • Sam Hak Kan Tang

Abstract

We explore the sources of economic growth in Sri Lanka for the period during which it implemented a liberalized trade policy. We first calculate the primal and dual total factor productivity growth (TFPG), and then evaluate the roles of FDI and exports in driving TFPG. Results show that the average annual primal TFPG for 1980–2019 is 2.1%, constituting 43% of output growth. The corresponding dual TFPG is 3.3%. This divergence between primal and dual calculations is due to market imperfections, regulations, government monopolies, and issues in national accounts compilations. Regression results show that FDI has been a significant driver of Sri Lanka’s TFPG. Moreover, we find that both factor accumulation and TFPG are important sources of output growth. This is the first study that calculates dual TFPG for Sri Lanka. It provides policymakers the direction for implementing targeted policies to enhance Sri Lanka’s long-term growth prospects.

Suggested Citation

  • Ranpati Dewage Thilini Sumudu Kumari & Sam Hak Kan Tang, 2025. "Identifying the sources of economic growth in Sri Lanka under trade liberalization: the primal and dual total factor productivity growth," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 30(2), pages 617-642, April.
    • Handle: RePEc:taf:rjapxx:v:30:y:2025:i:2:p:617-642
    DOI: 10.1080/13547860.2024.2306046
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