Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/169343
Authors: 
Felipe, Jesus
McCombie, John
Year of Publication: 
2017
Series/Report no.: 
ADB Economics Working Paper Series 512
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.
Subjects: 
accounting identity
dual TFP
East Asia
growth accounting
primal TFP
technical progress
JEL: 
O10
O47
O53
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/igo/
Document Type: 
Working Paper

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