Even if it is the case, we cannot entirely count on one single rising star. The growth rate of relatively high-income Asian economies needs also to be sustained at a reasonably high level if the prosperity of the regional economy as a whole is to be maintained. I believe there are three traps which we must avoid falling into if we are to sustain economic growth in Asia. Despite the heterogeneity which we have observed, these three traps are relevant to many countries in the region, albeit to varying degrees, depending on the circumstances. The first trap is the “middle-income trap.” 6 History shows that many economies have faced difficulties in advancing beyond the status of a middle-income economy once they have  4  See http://data.worldbank.org/about/country-and-lending-groups. In my presentation, I loosely follow their definitions by using thresholds of 12,000 U.S. dollars and 1,000 U.S. dollars of per capita GDP. 5  David N. Weil, Economic Growth, Third Edition, Pearson Education Limited, 2013. The darkness of North Korea is noteworthy, as is often pointed out in the literature, including Charles I. Jones, “The Facts of Economic Growth,” NBER Working Paper 21142, 2015. 6  The middle-income trap is discussed extensively in Asian Development Bank, Asia 2050: Realizing the Asian Century, 2011. 2  BIS central bankers’ speeches  exploited the growth opportunities provided by imported technology and abundant labor force from rural areas. Such an inflection point is known as the Lewisian Turning Point.
Likewise, in the modern world, higher productivity enables an economy to grow even with a smaller working-age population, and hence to avoid the demographic trap. If a country can maintain a decent productivity growth even after it has exploited imported technology and an underutilized labor force, that country is likely to succeed in growing its way out of the middle-income trap. Discussion of the myth of Asian miracles also highlights the importance of total factor productivity. Well before the Asian currency crisis of 1997–1998, Paul Krugman argued that the rapid growth of the NIEs or Asian tigers was not sustainable because their high growth was not sufficiently supported by total factor productivity. 8 History vindicated his assessment: the Asian currency crisis was in part an inevitable transition toward more sustainable and balanced growth. Let me confirm this point using data, with the usual disclaimer regarding the large uncertainty associated with estimates of total factor productivity. In graph 6, the vertical axis is per capita GDP growth, while the horizontal axis is total factor productivity growth. In the left panel, which describes the period preceding the Asian currency crisis, the dots representing high growth Asian economies are generally located well above the regression line. This means that their economic growth could be explained relatively more by expansion of inputs, such as demographic bonus and investment boom, than by total factor productivity growth.