| Firm Foundations of Growth: Productivity and Technology in East Asia and Pacific
June 2, 2025--The most productive (so-called frontier) firms in East Asia and Pacific are falling further behind global leaders, especially in the digital-intensive sectors that drive innovation. Synchronized reforms to improve competition, digital infrastructure, and skills can reignite productivity growth. |
| In East Asia and Pacific (EAP), productivity growth has slowed over the past two decades. Why has this slowdown come at a time of rapid technological progress?
First, in EAP, aggregate productivity growth has been mostly due to increases within firms, with little contribution from reallocation of market share between firms or firm entry and exit. Second, productivity growth has been slower within most-productive EAP firms-"the national frontier"-than less productive firms. This slows aggregate productivity, because the national frontier firms account for a large share of output and jobs. These findings are not unique to EAP, but are confirmed also in other developing countries. |