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Diversity of industrial structure and economic stability: evidence from Asian gross value added

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  • Kurt A. Hafner

    (University of Heilbronn)

Abstract

The paper provides evidence of convex growth-instability frontiers for 19 Asian countries based on the shares of different economic activities in gross value added between 1991 and 2016. Numerical simulations of gross value added shares show that Asian industry portfolios in 2014 were below the unbounded efficient frontier defined by Markowitz, and that rearranging the shares of economic activities leads to efficiency gains through higher income and lower output volatility. The data show that gross value added in Asian countries in general, and in Eastern Asia in particular, are contributed mainly by “other activity” and “transport” sectors, while optimal industry portfolios in Southern Asia and Southeast Asia are found to be more diversified. Stochastic frontier analysis confirms convex growth-instability frontiers and points to differences in labor growth rates and industrial diversification as the main sources of inefficiency. The results are robust to model specifications and data restrictions.

Suggested Citation

  • Kurt A. Hafner, 2020. "Diversity of industrial structure and economic stability: evidence from Asian gross value added," Asia-Pacific Journal of Regional Science, Springer, vol. 4(2), pages 413-441, June.
    • Handle: RePEc:spr:apjors:v:4:y:2020:i:2:d:10.1007_s41685-020-00152-w
    DOI: 10.1007/s41685-020-00152-w
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    2. Huang, Yongming & Faraz Raza, Syed Muhammad & Usman, Muhammad, 2023. "Asymmetric role of natural resources dependence, industrialization, and foreign direct investment in China’s economic growth," Resources Policy, Elsevier, vol. 85(PB).

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    More about this item

    Keywords

    Economic activities; Regional growth; Economic instability; Portfolio theory; Stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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