Although the variations in TFP growth could reflect the pro-cyclical nature of the measured variable, there were other iactors and policies that were also in play that might have influenced the changes in productivity growth, as we attempt to show below.

The growth rates of physical capital per worker, human capital per worker (proxied by educational attainment per worker, and TFP and their relative contributions to total output growth at three-year intervals, excluding crisis years<sup>6</sup> , during the period 1971-97 period are shown in Figures 3 and 4. We choose the three year intervals for ease of presentation, and it does not alter the substantive conclusions. Consistent with earlier findings, we find that growth in the physical capital accumulation is the key contributor to output growth. Averaged over the entire period its contribution was 47%. The contribution human capital averaged 33%, while that of TFP growth averaged 20%.

Between 1987-1991, the five years following the last recession, TFP was the chief contributor to growth averaging 60 per cent. The contribution of capital per worker in this period was under 10 per cent. In more recent years (1993-97), however, the contribution of TFP has fallen to under 10 percent. In this period capital accumulation became the main driver of growth with an average share of nearly 60 per cent. Thus compared with the late 1980s the character of growth in recent years has changed from being productivity driven to input driven. The contribution of education per worker was roughly 30 percent in both periods.

We also compare the Malaysian experience with other countries in the region. For this purpose the results of two studies (Sarel, 1997 and Bosworth and Collins, 1996) that provide comparative factor productivity estimates for East Asian countries are reported in Table 1. Since these studies use different methodologies, and time periods, their estimates are not comparable and neither are the estimates presented here comparable with these studies. It is the relative ranking of the countries within each study that is important. In Sarel's study Malaysia's performance is better than Indonesia and Philippines, comparable with Thailand, and a little lower than Singapore. In Bosworth and Collins' work, while Malaysia still does better than Philippines and Indonesia, its performance falls short of the other countries.

**Role of Labor Productivity:** Declining TFP growth can be associated with lower TFP within sectors and/or a slower process of reallocating resources from less to more efficient sectors in the economy. Because data on capital stock and investment by sector are not available, TFP growth within each sector cannot be measured. Labor productivity unadjusted for educational attainment _(Yi/Lj)_ by sector i, can, however, be computed from available data. This information can be utilized to decompose economywide labor productivity change into labor productivity change in each sector and the productivity gains achieved through the reallocation of labor to more productive sectors.

<!-- Start of picture text --> L = y= EsitYi, (5)<br><!-- End of picture text --> 6 Years in which output per worker was negative, namely, 1975, 1985, and 1986.

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