Question 15.10

1. Some economists think the high rates of growth of productivity achieved by many Asian economies cannot be sustained. Why might they be right? What would have to happen for them to be wrong?

The conditional version of the convergence hypothesis says that countries grow faster, other things equal, when they start from relatively low GDP per capita. From this we can infer that they grow more slowly, other things equal, when their real GDP per capita is relatively higher. This points to lower future Asian growth. However, other things might not be equal: if Asian economies continue investing in human capital, if savings rates continue to be high, if governments invest in infrastructure, and so on, growth might continue at an accelerated pace.