Determinant of Productivity Growth:

Evidence from Emerging Asian Countries

Abstract

Total factor productivity growth has played a significant role in uplifting the economic development process of nations in recent years. This paper uses the recently published data of Penn World Table (PWT, 9) for six emerging economies (China, India, South Korea, Malaysia, Thailand and Taiwan) to establish a relationship between the growth of total factor productivity and its various determinants. Panel data econometric techniques are employed and the data utilized were spanning from 1955 to 2012. We found that growth of real GDP and human capital are positively and significantly related with the growth of total factor productivity. Similarly physical capital stock is although positively impacted the growth of total factor productivity but however this relationship is not significant statistically. Lastly, an inverse and significant relationship is observed between employment level and total factor productivity growth for the selected emerging economies. The study concludes that relatively richer and highly educated economies have improved their productivity while employment level has adversely affected the growth of TFP. The results of the study imply that economies should focus on income and human capital increasing policies and further to translate the benefits the focus should be on efficiency of labor rather increasing the employment level.