Productivity growth in Asian manufacturing: the structural bonus hypothesis examined

This paper examines the role of structural change in explaining aggregate productivity growth in the manufacturing sector of four Asian countries over the period 1963–1993. The conventional shift-share analysis is used to measure the impact of shifts in both labour and capital inputs. The results do not support the structural-bonus hypothesis, which states that during industrial development, factor inputs shift to more productive branches. This finding is robust, even when the conventional shift-share analysis is modified to take into account increasing returns to scale as described in Verdoorn's law. It is argued that improvements in productivity levels were widespread and depended negatively on the distance from the global technology frontier, confirming the Gerschenkronian notion of catch-up.