Examining the long-run and short-run productivity and efficiency of the ASEAN economies

What is it about?

This study examines the productivity of the ASEAN economies using a stochastic production frontier model from 1980 to 2017 in the presence of transient and persistent efficiency. Examining the productivity of the ASEAN economies allows policymakers to evaluate the effects of previous policy implementations and provides policymakers with essential information for future policies. The estimated findings show that capital and labour are positive and significant to total factor productivity (TFP) growth. However, the effects of labour is more effective as it increases over time. Furthermore, the average technical efficiency of the ASEAN economies on is at 92.3%, which suggests GDP can be increased by a further 7.7% if persistent efficiency is increased. Finally, the technological progress of the ASEAN economies show mixed results with an average of 1.0% technical change over the time period, however, improving over time. Policy implications are discussed.

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Photo by M. B. M. on Unsplash

Photo by M. B. M. on Unsplash

Why is it important?

Although the ASEAN economies have experienced a relatively moderate growth path, there are a number of challenges that the region faces. In addition to a slowdown in economic growth, the region also faces the issue of weak workforce productivity, an overdependence on external trade and a lack of investments in infrastructure leading to voids in infrastructure development in communication, energy and transport. Furthermore, these issues are intensified by other neighbouring economies such as China and India. Therefore, the ASEAN economies, as an integrated region and individually, must be ready to commit and develop future initiatives to address these issues.

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