The Global Economic Recession and Industrial Structure: Evidence from Four Asian Dragons
ADBI Working Paper Series
The collapse of exports that has attended the current global economic recession threatens the export-led economic growth of the four Asian dragons. To better understand the economic performances and future prospects of the four dragons, this paper first examines the economic structural changes that have taken place in Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, as well as the gradual shifting of the sources of economic growth away from the manufacturing sector and toward the service sector. Following this, a panel data set for the four dragons for the period 1995–2008 is constructed and a fixed-effects model applied to the data. The estimated coefficients deriving from the application of the model indicate that growth in the service sector, exports, and gross fixed capital formation each have a positive and statistically significant impact on economic growth. While the estimated coefficient is not significant, there is also a hint of a positive causal relationship between manufacturing sector growth rates and GDP. The empirical results confirm the shifts observed in industrial structures and the contribution of the service sector to economic growth. New service development (NSD), which integrates manufacturing output with high value-added services, is anticipated to be a new engine for economic growth and deserves more attention, especially in the realm of government policymaking within the four Asian dragons.