Convergence, Catch-up and Growth Sustainability in Asia: Some Pitfalls

Abstract

This paper takes a sample of 16 Asian countries and shows that: (i) Income levels in Asia have not tended to converge during the last 30 years, (ii) There has not been a catch-up process with the US: the initially more advanced Asian countries have reduced the income gap with the US faster. (iii) The catch-up variable does not explain labour productivity growth in Asia. The most important explanatory variables are the growth of demand and the level of human capital. (iv) The amount of time it will take most Asian countries to catch up with the US in terms of per capita income, under reasonable assumptions, is so long that the notion that Asia is almost, or soon will be, wholly on its own and join the ranks of (or more likely will compete with) the developed economies should be dispelled. Only a technological revolution, which would allow the developing countries to jump above and beyond today's developed nations, would reverse the situation. This, however, does not seem to be a realistic scenario. (v) The effect of the recent financial crisis in East and Southeast Asia will be to lose at least one decade in the development race.