Analysis of Growth Factors of the Four Asian Dragons Following the Asian Financial Crisis

Abstract

Purpose - This study aims to identify implications from a factor decomposition analysis of the growth structure of four Asian dragons, Korea, Singapore, Hong Kong, and Taiwan, which have re-emerged as key regions in the fourth industrial revolution and the global value chain.
 Design/Methodology/Approach - With the Translog Production Function employed as the analysis model, the Stochastic Frontier Analysis model was used to derive total factor productivity (TFP), which was decomposed into four factors including returns to scale, technological changes, technical efficiency, and others.
 Findings - The results of the analysis conducted over different periods indicate that during periods of high growth, the economy’s scale effect largely contributed to total factor productivity. However, it became evident that the effect of technological changes had become increasingly important after going through the foreign exchange and financial crises.
 Research Implications - The new growth momentum in these four regions suggests a need to invest in human capital, research and development, and other areas to cope with the low-growth era. Although past high-growth was attributed to the returns to scale effect, the economic structures shifted in the direction of enhancing efficiency, and the effect of technological changes became a driving force while going through the crises. These results show a need to focus on technological advancement through active research and development investment to increase total factor productivity.