The Productivity Debate of East Asia Revisited: A Stochastic Frontier Approach

This paper applies a stochastic frontier production model to the data from Penn World Table’s 49 countries over the period 1965-1990, to decompose total factor productivity growth into technical change and technical efficiency change. Empirical results show East Asian countries led the whole world in productivity growth, mainly because their technical efficiency gain was so much faster than that of other countries. East Asian countries also registered rapid technical change, which was comparable to that of the G6 countries after the late 1980s. The results provide evidence that negate the hypothesis that East Asian growth was mostly input-driven and unsustainable.