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Potential Output in Asia: Some Forward-Looking Scenarios

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  • Andrew Burns

    (Global Lead for Macroeconomic Modeling, World Bank, Washington, DC.)

Abstract

This paper presents estimates of potential output growth for a sample of 26 Asian economies and projects potential output growth through 2040 under several scenarios. Results suggest that in the absence of further capital deepening, and assuming continued total factor productivity growth at recent rates, potential output growth across economies could slow from a median of 4.6% during 2010–2015 to 2.7% between 2035 and 2040. Demographic trends and an assumed stabilization in capital–output ratios account for most of the slowing. Much better outcomes are possible if trends are supported by policy. Better total factor productivity growth could raise potential output by between 11% and 24% by 2040, while lower unemployment and higher participation rates could boost potential output by 10% or more in some South Asian economies. An improved investment climate could add between 6% and 10% to potential output in most economies, while accelerating structural convergence (moving labor from lower to higher productivity sectors) could raise potential output by 10% or more in half of the examined countries.

Suggested Citation

  • Andrew Burns, 2016. "Potential Output in Asia: Some Forward-Looking Scenarios," Asian Development Review, MIT Press, vol. 33(2), pages 28-55, September.
    • Handle: RePEc:tpr:adbadr:v:33:y:2016:i:2:p:28-55
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00071
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    References listed on IDEAS

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    More about this item

    Keywords

    cross-economy growth comparisons; potential output; total factor productivity; sectoral change;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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