This paper analyzes Asia’s dramatic economic growth during the past thirty years and explores the prospects for continued growth during the next thirty years. The paper, which was written as a technical background paper for the Asian Development Bank’s Emerging Asia: Changes and Challenges study, covers a wide range of topics, including the determinants of economic growth across countries, the relationship between manufactured exports and economic growth, the determinants of savings rates, the role of governance in East Asia’s rapid growth, and economic outlook for Asia’s future.
Asia’s episode of rapid economic growth since the 1960s, as remarkable as it was by historical standards, can be explained in an international comparative context. Special theories of Asian growth are not necessary. East Asian countries grew faster than the rest of the world for four key reasons: they had substantial potential for catching up (since the entered the 1960s with relatively low incomes and relatively well-educated workers), their geographical and structural characteristics were by-and-large favorable, demographic changes following World War II worked in favor of more rapid growth, and their economic policies and strategy were conducive to sustained growth. Most importantly, the high-performing East Asian countries recognized the imperative of joining the world economy through the promotion of labor-intensive manufactured exports. They promoted exports through a combination of policies -- relatively free trade, convertible currencies, macroeconomic stability -- and through a set of innovative institutions -- such as export processing zones, duty exemption schemes, and incentive packages for foreign direct investment.
These findings have profound implications for the next thirty years. For the fast-growing countries of East Asia, there is a continuing opportunity for rapid growth, though at rates that are likely to be somewhat slower than in the past, precisely because the process of catching up has been so successful to date. Yet future growth will require successful institutional adaptations to new challenges, including: an aging population; increasing urbanization and political participation; and pressures related to increasing integration of the world economy. As a result, these countries will face increased stresses on public-sector budgets, pressures for continued reforms of the legal system, and the need for flexibility and adjustment of political institutions. For countries that grew more slowly during the past thirty years, the main message is that faster growth is possible, and indeed likely, as these countries adopt market-based strategies and increased openness to world markets. South Asia has the opportunity for the kind of dynamism displayed previously in East Asia. However, such good performance will depend on continued institutional and policy reforms in trade, the budget, health and education. Our calculations suggest that under reasonable assumptions, Asia’s share in world GDP could well grow to more than half of the world economy from its current level of about 35% during the next thirty years.
- Economic growth in Asia
- Radelet, Steven ; Sach, Jeffrey; Lee, Jong-Wha
- Harvard University(Harvard Institute for International Development)
Economic growth in Asia
[Cambridge, U.S.] : Harvard University(Harvard Institute for International Development)
|Series Title; No||Development Discussion Paper / 609|
|Subject Country||Central Asia(Asia and Pacific)
Eastern Asia(Asia and Pacific)
South-Eastern Asia(Asia and Pacific)
South Korea(Asia and Pacific)
Southern Asia(Asia and Pacific)
|Subject||Economy < Macroeconomics|