Krugman and Young Revisited: A Survey of the Sources of Productivity Growth in a World with Less Constraints

Young (1994) and Kim and Lau (1994), among others, argue that the "Asian Miracle" of relatively high growth was largely due to increases in factor inputs. Productivity growth would eventually slow because of diminishing returns to factors. Thus total factor productivity growth was not the reason for the Asian Miracle. Krugman (1994) summarized this research, comparing the growth experience of Singapore, among the other Asian Tigers, to that of the Soviet Union and argued that there was reason to expect a similar outcome, namely a collapse of the political institutions due to economic stagnation. Interestingly, Krugman consistently refers to efficiency growth and technical progress as equivalent terms. In this paper and survey we discuss alternative explanations for economic growth in Asia as well as elsewhere in the world in the post WWII years. The alternative explanation is explicit in Krugman's treatise. It is economic growth due to a world with less constraints.