Long-Term Projections of Asian GDP and Trade

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• Publisher: Asian Development Bank
• Year: 2011
• Print ISBN: 9789290924784
• eBook ISBN: 9789290924791
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Long-term growth in the region depends largely on supply-side factors, augmented by each economy's productive capacity. Such growth reflects the combined effects of production factors, such as capital and labor, as well as productivity improvements---not on the short-term business cycle. This distinction matters, as policies for sustaining growth are different from policies for minimizing cyclical fluctuations. This report details the key findings of the Asian Development Bank's project on Long-Term Projections of Asian Gross Domestic Product (GDP) and Trade.

II. Summaries and Key Findings

A. Summaries

Seven research products were produced to analyze GDP, its components (i.e., saving rate, physical capital accumulation, total factor productivity [TFP], labor force, and human capital accumulation), and international trade flow. In the following subsection, each paper is summarized.

1. Human Capital Accumulation in Emerging Asia, 1970–2030⁴

JONG-WHA LEE AND RUTH FRANCISCO

Developing Asia has made rapid progress in raising the level of its educational capital during the past 40 years, due in large part to higher school enrollment rates, especially at the secondary level. Lee and Francisco (2010) conducted a regression analysis of the determinants of school enrollment and found that better parental education and income, lower income inequality, declining fertility, and higher public educational expenditures contributed to the increase in school enrollment.

The authors then projected future trends in years of schooling based on the results of the regression analysis and found that average years of schooling in developing Asia are projected to increase only from 7.0 years to 7.6 years by 2030, significantly slower than the 4.1-year increase during 1970–2010. That would put the region’s educational capital in 2030 at only the 1970 level of advanced countries such as the United States or Japan, or still 3.5 years behind the level of advanced countries in 2010. To sustain human development, the region needs to invest in improving educational quality and raising school enrollment rates at the secondary and tertiary levels.

Park (2010) support an accumulationist’s view during the pre-2000 period but show evidence of a growing contribution of total factor productivity during the post-2000 period.

2. Past and Future of the Labor Force in Emerging Asian Economies⁵

JINYOUNG KIM

Kim (2010) investigated the determinants of past changes in the labor force of the 12 developing Asian economies, and made projections of the labor force in those economies for 2011–2030. Results from the regression analysis indicate that the labor force has grown faster than the population, has an inverted U-shape relationship with per capita GDP, and is smaller in more capital-intensive countries.

Using extrapolation, the author predicted that the labor force will increase in all 12 economies during the first decade of 2011–2030 but will eventually decline in the People’s Republic of China. (PRC); Hong Kong, China; Republic of Korea; Singapore; and Taipei,China. The author also projected the unemployment rate and average working hours in those economies.

3. Economic Growth in Asia: Determinants and Prospects⁶

JONG-WHA LEE AND KISEOK HONG

Using a growth accounting framework, Lee and Hong (2010) found that developing Asia grew rapidly over the past 3 decades, mainly due to robust growth in capital accumulation. The contributions of education and TFP in the region’s past economic growth were relatively limited in the past decades.

The authors then made long-term growth projections for developing Asia by combining the growth accounting framework with a growth regression approach. Their baseline projections, based on the model of conditional convergence, showed that the growth rates of GDP of the 12 developing economies for the next 3 decades will be consistently lower than their historical performance However, policy reforms in education, property rights, and research and development can substantially raise GDP growth in the region and partly offset the slowdown in growth caused by the convergence phenomenon. Yet even under the baseline scenario, the region’s share in the world economy will increase from 34% in 2009 to close to 50% in 2030.

4. Projection of Long-Term Total Factor Productivity Growth for 12 Asian Economies⁷

JUNGSOO PARK

Park (2010) examined past trends and patterns in the growth of TFP in developing Asia during the past 4 decades. Growth accounting exercises, focused on the contribution of TFP growth, were performed for the 12 developing economies. The results support an accumulationist’s view during the pre-2000 period but show evidence of a growing contribution of TFP during the post-2000 period. The author estimated an empirical model of TFP growth augmented with human capital and research and development using a country-level panel dataset, and found that the major source of TFP growth of developing Asia in the early years was a catch-up effect driven by its low base.

However, the author also found that the role of human capital in raising TFP growth has been gradually increasing for Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, but has stagnated or weakened for other developing Asia economies. Strong growth in TFP is projected for the next 2 decades, supporting the idea that developing Asia will increasingly shift to efficiency-driven growth from input-driven growth.

The domestic saving rate in developing Asia as a whole will remain elevated in the next 2 decades, mainly driven by rising income levels, which are only partially offse...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Acknowledgments
• Executive Summary
• Abbreviations
• I. Introduction
• II.   Summaries and Key Findings
• III.  Selected Issues
• References
• Figures
• Back Cover