GLOBAL PRODUCTIVITY
CHAPTER 5
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learning outcomes are poor (World Bank 2018a). In learning-adjusted terms, which controls for the quality of education in addition to years of attainment, SAR and SSA lag substantially (six or more learning-adjusted years) behind advanced economies. Higherskilled and better-educated labor forces tend to adopt new technologies, including new information and communication and manufacturing technologies, more readily and more effectively (World Bank 2019b). Trade integration. LAC, SAR, and SSA could receive a productivity boost from more participation in global trade, particularly through deeper integration into global value chains (GVCs). EAP, meanwhile, faces maturing supply chains and has the challenge of maintaining the productivity gains it achieved through rapid trade integration in the 2000s. Regions deeply integrated into GVCs (EAP and ECA) may also experience weaker productivity should companies reassess the existing production networks, or even re-shore production, in the context of COVID-19 (Freund 2020; World Bank 2020a).
East Asia and Pacific Before the COVID-19 pandemic, EAP had the fastest productivity growth of the six regions, averaging 6.1 percent a year in 2013-18. Nevertheless, productivity levels remain below the EMDE average in most EAP economies. Factor reallocation toward more productive sectors, high levels of investment, and trade integration promoted above-average productivity growth. Most of these drivers are expected to become less favorable in the future, however, and the pandemic could further weaken investment and the supply chain linkages that have been an important conduit for productivity gains in the region over the past decade. A comprehensive set of reforms to liberalize services sectors, improve corporate management, level the playing field for private firms, enhance human capital, facilitate urban development, foster innovation, and build resilience against future unexpected shocks is needed to support robust productivity growth.
Evolution of regional productivity Rapid productivity growth. Labor productivity growth in EAP rose from an average of 4.3 percent a year in the 1980s to 6.3 percent in the 1990s and 8.9 percent in 2003-08 (figures 5.4 and 5.5).4 Although productivity growth in the region remained the highest of the six EMDE regions, it slowed decisively following the GFC, averaging 6.1 percent per year during 2013-18.5 The post-GFC productivity growth slowdown was also 4 Productivity data are available for 16 EAP countries: Cambodia, China, Fiji, Indonesia, Lao People’s Democratic Republic, Malaysia, Mongolia, Myanmar, Papua New Guinea, the Philippines, Samoa, the Solomon Islands, Thailand, Tonga, Vanuatu, and Vietnam. EAP averages are heavily influenced by China, which accounts for 80 percent of EAP output in 2013-18. That said, even the median productivity level in EAP is below that of the median EMDE region. 5 For studies using country-level data, see APO (2018); IMF (2006, 2017); and World Bank (2018b, 2019a). For studies using firm-level data, see Di Mauro et al. (2018); de Nicola, Kehayova, and Nguyen (2018); OECD (2016); and World Bank and DRCSC (2019). For studies of how product and labor market reforms have increased output and productivity, see Adler et al. (2017); Bouis, Duval, and Eugster (2016); Chen (2002); Nicoletti and Scarpetta (2005); and Timmer and Szirmai (2000).
