Revisiting the Productivity Debate

Abstract

The role of total factor productivity (TFP) in economic growth has been fiercely debated since the emergence of several studies which questioned the sustainability of rapid economic growth in East Asia in the 1980s and 1990s.¹ Though the dispute has never been resolved, it did generate a huge literature investigating the contribution of TFP to economic growth with a particular focus on the emerging Asian economies.² Some of the literature has dealt exclusively with the Chinese economy which has achieved impressive growth since the late 1970s when an economic reform programme was implemented throughout the nation.³ China’s growth resembles the patterns of development in other East Asian economies, allowing the literature on productivity studies to be extended to cover the Chinese economy.’ But China is also different from other high-performing economies in Asia due to the fact that, before economic reforms, the country had had a centrally planned economic system for decades. Studies of China’s recent growth may have important policy implications for many other transitional economies as well as for further economic growth in China in the coming decade.