Taking CO2 emissions into a country's productivity change: The Asian growth experience

Abstract

A country's macroeconomic policies have two basic objectives: to provide its citizens with a means to make a better living and a preferable environment. For the past decades, accompanying its fantastic economic growth, fast-developing Asia has become one of the major contributors to the increase of global carbon dioxide emissions. This paper analyzes productivity growth of ten Asian countries, namely, China, Japan, the NIEs and the ASEAN-4, by examining their outputs from economic performance and environmental impact standpoints. Productivity growth and its components are calculated using the Malmquist index. There appears to be a widening gap between the productivity growth trends without/with CO2 emissions of the ten Asian economies. This implies that the factor of productivity could be over-emphasized at great cost to the environment. A cross-country comparison analysis, considering CO2 emissions, shows that the productivity of China and ASEAN-4 deteriorated while the productivity growth of Japan and NIEs performed much better.