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Title page 1

Contents 4

Contributors 7

Acknowledgments 10

Foreword 11

Introduction 13

PART I. The Complex Challenges of Asia's High-Income Transition 22

1. The Dark Side of Escaping the Middle-Income Trap: A SAGE Study of Asian High-Income Countries 23

1-1. The Nexus of Development: Social and Environmental Changes in Asia's High-Income Transition 58

1-2. A SAGE Approach for Balanced Progress: Lessons from the Republic of Korea 69

PART II. Aligning Economic Growth and Institutional Progress 78

2. Exits from the Four-Lane Highway to National Development: What Are the Risks to Sustained Economic Growth? 79

2-1. Brief Reflections on Southeast Asian Development Dynamics 117

2-2. Reflections on the Income Aspect of the Middle-income Trap 124

PART III. Technological Disruption and the Future of Work in Asia 130

3. Asia's Prospects in the Age of Digital Technology and Declining Demand for Labor 131

3-1. Rethinking Asia's Growth: An Innovation-Led Future 157

3-2. Asia in the Digital Transformation: Labor Demand and Global Supply Chains 167

3-3. The Catch-Up Index and the People's Republic of China's Development Trajectory: A Comprehensive Analysis 173

PART IV. Resilient Integration: Value Chains and Economic Strategy in a Geopolitical Era 181

4. Charting Prosperity: Geopolitics and Asia's Economic Future 182

4-1. Geoeconomic Fragmentation and Resilience of Global Production Value Chains in East Asia and ASEAN 211

PART V. Drivers of Productivity Growth in Asia: Finance, Capital Mobilization, and Beyond 220

5. Rapid Productivity Growth in Asia: Internal and External Financing 221

5-1. Productivity and Growth in Asian Economies 271

5-2. Financing Growth: Asian Experiences and Lessons 281

PART VI. Population Aging and the Pursuit of Sustainable Growth in Asia 289

6. Navigating Demographic Aging and Macroeconomic Growth in Asia: Lessons from Japan's Experience 290

6-1. Opportunities and Challenges of Demographic Change in Young Asian Economies 317

6-2. Aging, Human Capital, and Economic Growth: Lessons from Japan for Aging Asia 325

PART VII. Green Transitions and Development Opportunities in South and Southeast Asia 333

7. Opportunities for South and Southeast Asian Countries to Prosper in a Carbon-Constrained World 334

7-1. Regional Readiness for a Carbon-Constrained Future: Lessons and Levers for South and South Asia 352

7-2. Climate Change and Energy Transitions in South and Southeast Asia 361

Tables 29

1. The Dark Side of Escaping the Middle-Income Trap: A SAGE Study of Asian High-Income Countries 29

Table 1. Correlations Between GDP Per Capita and Solidarity, Agency, and Environmental Stewardship for Japan, 2010-2023 29

Table 2. Correlations Between GDP Per Capita and Solidarity, Agency, and Environmental Stewardship for Singapore, 2010-2023 30

Table 3. Correlations Between GDP Per Capita and Solidarity, Agency, and Environmental Stewardship for the Republic of Korea, 2010-2023 30

Table 4. Social and Environmental Correlates of Escaping the Middle-Income Trap 31

3. Asia's Prospects in the Age of Digital Technology and Declining Demand for Labor 137

Table 1. Per Capita Gross Domestic Product (in rounded $) 137

Table 2. Total Patents Granted in 2023: The Top Five 149

3-1. Rethinking Asia's Growth: An Innovation-Led Future 161

Table 1. Labor Market Impacts of Increased AI Productivity 161

5. Rapid Productivity Growth in Asia: Internal and External Financing 222

Table 1. Real Per Capita Gross Domestic Product Growth in Developing Asia, 1990-2019 222

Table 2. G-Cubed Regions 226

Table 3. G-Cubed Sectors 227

Table 4. Population Share by Region 229

Table 5. Age Structure by Region 230

Table 6. Country Mapping Between National Transfer Account Database and G-Cubed 232

Table 7. Sector Mapping Between the Groningen Database and the G-Cubed Model 234

Table 8. Sectoral Productivity Levels in 2017 235

6. Navigating Demographic Aging and Macroeconomic Growth in Asia: Lessons from Japan's Experience 303

Table 1. Employment Shares by Industry 303

6-2. Aging, Human Capital, and Economic Growth: Lessons from Japan for Aging Asia 329

Table 1. Growth Accounting Results for Selected Asian Economies 329

7-1. Regional Readiness for a Carbon-Constrained Future: Lessons and Levers for South and South Asia 353

Table 1. Estimated Stranded Assets in South and Southeast Asia by Sector (2030 Projections) 353

Table 2. Distribution Network Performance Metrics (2023) 354

Table 3. Impacts of Cross-Border Energy Trade 355

Table 4. Typhoon/Storm Impacts on Wind Infrastructure 356

Figures 28

1. The Dark Side of Escaping the Middle-Income Trap: A SAGE Study of Asian High-Income Countries 28

Figure 1. Escape from the Middle-Income Trap 28

Figure 2. Evolution of SAGE by Country, 2010-2023 29

Figure 3. Evolution of SAGE Across Countries, 2010-2023 33

Figure 4. Scatterplots of Socioenvironmental Prosperity Versus Economic Prosperity 34

1-1. The Nexus of Development: Social and Environmental Changes in Asia's High-Income Transition 61

Figure 1. Change in Per Capita Carbon Dioxide Emissions and Gross Domestic Product, 1990-2022/2023 61

Figure 2. Individuals Using the Internet (% of the population) 62

Figure 3. Annual Change in Forest Area vs. Gross Domestic Product per Capita, 2015 64

Figure 4. Change in Per Capita Carbon Dioxide Emissions and Gross Domestic Product, 1990-2022 65

1-2. A SAGE Approach for Balanced Progress: Lessons from the Republic of Korea 74

Figure 1. Total Fertility Rates 74

Figure 2. Old-Age Dependency Ratio 75

2. Exits from the Four-Lane Highway to National Development: What Are the Risks to Sustained Economic Growth? 84

Figure 1. National Development Empirically Necessary and Sufficient for High Levels of Social Progress 84

Figure 2. Social Progress Index and Improvement with Three Elements of National Development 85

Figure 3. Strong and Nonlinear Cross-National Association of Gross Domestic Product per Capita and State Capability 86

Figure 4. Low State Capability Start for Many Economies with Rapid Growth During 1996-2022 89

Figure 5. Positive, but Weak, Association of Economic Growth and Improvement in State Capability During 1996-2022 91

Figure 6. Evolution of Gross Domestic Product per Capita and State Capability During 13 Recent Acceleration Episodes in Asia 93

Figure 7. Illustration of the (Hypothetical) Extrapolation of Recent Past Trends in Growth of Gross Domestic Product per Capita and... 96

Figure 8. Illustration of the Evolution of Gross Domestic Product per Capita and State Capability from Extrapolating Past Growth Rates... 97

Figure 9. Estimated "Gross Domestic Product per Capita Gap" from the Extrapolation of Growth Rates of Gross Domestic Product... 99

Figure 10. Estimated "Gross Domestic Product per Capita Gap" from the Extrapolation of Growth Rates of Gross Domestic Product... 101

2-2. Reflections on the Income Aspect of the Middle-income Trap 127

Figure 1. HDI Relative to US HDI, Selected Economies by Continent 127

3. Asia's Prospects in the Age of Digital Technology and Declining Demand for Labor 139

Figure 1. Gross Domestic Product Per Capita (1990-2023) of Selected Asian Countries 139

Figure 2. India's Foreign Exchange Reserves, 1950-51 to 2016-17 142

3-1. Rethinking Asia's Growth: An Innovation-Led Future 158

Figure 1a. Share in World Gross Domestic Product by Purchasing Power Parity, 1970-2022 - Top 7 Decliners, Excluding the People's... 158

Figure 1b. Share in World Gross Domestic Product by Purchasing Power Parity, 1970-2022 - Top 7 Gainers, Excluding the People's... 158

Figure 2. Labor Share by Sector Groups in Emerging Economies, 1995-2014 163

3-3. The Catch-Up Index and the People's Republic of China's Development Trajectory: A Comprehensive Analysis 175

Figure 1. The People's Republic of China's Purchasing Power Parity Gross Domestic Product Growth Relative to the United States (2010-2023) 175

4. Charting Prosperity: Geopolitics and Asia's Economic Future 186

Figure 1. Global Trade and Military Spending of Asian Economies 186

Figure 2. Import Sourcing and Geoeconomic Factors for the PRC-India Pair 195

Figure 3. Import Sourcing and Geoeconomic Factors for the PRC-Indonesia Pair 197

Figure 4. Import Sourcing and Geoeconomic Factors for the PRC-Philippines Pair 199

Figure 5. Reshaping ACFTA: Trade and Geoeconomic Factors for the PRC-Indonesia Pair 203

Figure 6. Reshaping ACFTA: Welfare Consequences for the PRC-Indonesia Pair 205

4-1. Geoeconomic Fragmentation and Resilience of Global Production Value Chains in East Asia and ASEAN 215

Figure 1. Regional Trade Groupings in East Asia 215

5. Rapid Productivity Growth in Asia: Internal and External Financing 233

Figure 1. Global Age-Income Profile 233

5-1. Productivity and Growth in Asian Economies 275

Figure 1. Growth in Total Factor Productivity 275

Figure 2. Forecast Impact of Population Aging on the People's Republic of China's Gross Domestic Product Growth Rate 276

6. Navigating Demographic Aging and Macroeconomic Growth in Asia: Lessons from Japan's Experience 291

Figure 1. Population Growth in Asian Countries: Data and Projections 291

Figure 2. Total Fertility Rates in Asian Countries 292

Figure 3. Life Expectancy at Birth in Asian Countries 292

Figure 4. Old-Age Dependency Ratios in Asian Countries: Data and Projections 293

Figure 5. Expenditures on the Social Insurance Programs (as a share of GDP) 296

Figure 6. Government Expenditures and Tax Revenues as a Share of GDP 297

Figure 7. Government Debt as a Share of GDP 298

Figure 8. Total Fertility Rates in Some Developed Nations 300

Figure 9. Participation Rates by Age in Japan 302

Figure 10. Lifecycle Profiles of Consumption: Total and by Item Group 309

Figure 11. Consumption Projections 310

Figure 12. Earnings Inequality by Age: Gini Coefficient 311

Figure 13. Earnings Inequality Decomposition 311

6-2. Aging, Human Capital, and Economic Growth: Lessons from Japan for Aging Asia 326

Figure 1. Trend and Projection of Working-Age Population Share in Selected Countries, 1980-2070 326

Appendix Tables 56

1. The Dark Side of Escaping the Middle-Income Trap: A SAGE Study of Asian High-Income Countries 56

Table A2.1. Correlations Between Gross Domestic Product Per Capita and Solidarity, Agency, and Environmental Stewardship for Japan,... 56

Table A2.2. Correlations Between Gross Domestic Product Per Capita and Solidarity, Agency, and Environmental Stewardship for Singapore,... 56

Table A2.3. Correlations Between Gross Domestic Product Per Capita and Solidarity, Agency, and Environmental Stewardship for the... 57

5. Rapid Productivity Growth in Asia: Internal and External Financing 254

Table A1.1. Productivity Levels by Sector by Region in Purchasing Power Parity 254

Table A1.2. Productivity Levels by Sector by Region in Market Exchange Rates 255

Table A2.1. Growth Rates in Gross Domestic Product and per Capita Gross Domestic Product in Baseline 256

Table A2.2. Changes in Investment (% Gross Domestic Product) 257

Table A2.3. Changes in Real Gross Domestic Product 258

Table A2.4. Changes in Real Interest Rates 259

Table A2.5. Changes in Private Consumption (% Gross Domestic Product) 260

Table A2.6. Changes in Private Saving (% Gross Domestic Product) 261

Table A2.7. Changes in Government Deficit (Public Saving) (% Gross Domestic Product) 262

Table A2.8. Private Saving as Share of Investment 263

Table A2.9. Changes in Trade Balance (% Gross Domestic Product) 264

Table A2.10. Changes in Real Exchange Rates 265

Table A2.11. Changes in Sectoral Output 266

Table A2.12. Gross Domestic Product Impacts of Climate Change 268

Table A2.13. Annual Growth of Per Capita GDP 269

Table A2.14. Average and Total Growth of Per Capita Gross Domestic Product over 2025-2050 270