The Effect of Consumption on Economic Growth in Asia

Abstract

The purpose of this paper is to assess the effect of consumption on economic growth in Asia based on 52 countries/territories, while the effects of other variables that are also assumed to affect economic growth are statistically controlled. For this purpose, this study explores different patterns of economic growth based on 18 ‘economic’ variables, including the consumption. There are six patterns of economic growth identified: (1) consumption-driven; (2) export-led; (3) oil-rich; (4) savings-based; (5) government (public) spending-based and (6) domestic investment-based. Empirical evidences show that the dominance of the consumption-driven economic growth in Asia cannot be denied. The patterns found in Asia are shared with the rest of the world economy, yet there were some ‘uniqueness’ to the Asian patterns, which feature as follows: (1) high savings; (2) a large defense spending affected by both oil-richness and politics (authoritarian government); and (3) high ‘national’ global competiveness worldwide. And any negative ‘uniqueness’ to the Asian economy should be reassessed in light of the ‘multidimensionality’ of successful consumption-driven economic growth model as empirically proven in Asia.