East Asian NIEs are said to have enjoyed only low productivity gains in the course of strong
economic growth. This paper suggests that low productivity gains are the result of the
mechanical properties of growth accounting. Sequential structural change and adjustment
increased capital intensity by shifting production to more capital-intensive industries (new
industries and high quality products), thus lowering productivity growth mechanically. Taking
into account of the interaction between the contribution of capital and technology to output
growth, the pessimistic paradigm of low productivity growth and low technological change in
East Asia is open to question.