Explaining East Asian Growth

1. Explaining East Asian Growth Jennifer Moore Xiong Ye

2. There Are At Least Three Models of East Asian Development Dwight H. Perkins

3. World Bank Study of The Success of High Performing Asian Economies • 1. the emphasis on the export of manufactures • 2. the maintenance of macroeconomic stability • 3. the emphasis on primary and secondary rather than tertiary education

4. At Least Three Distinctive Models • 1. Manufactured export-led state interventionist model: Japan, Korea, and Taiwan • 2. Commerce dominated model: Singapore and Hong Kong • 3. Rich in natural resources but not in human resources: Indonesia, Malaysia, and Thailand

5. 1. The emphasis on the export of manufactures • World Bank • The concentrated effort to promote manufactured exports was critical. • Perkins • Manufacture exports for Malaysia and Indonesia, because of the exportable natural resources, are not the same as other East Asian economies.

6. 2. The maintenance of macroeconomic stability • World Bank • HPAEs respected fiscal prudence and avoided overvalued exchange rates. • Perkins • It is not that the HPAEs all managed to maintain balanced budgets and limit their borrowing abroad. • HPAEs, on average, budget deficits were as large as other developing countries. • Indonesia borrowed heavily abroad.

7. 3. Emphasis on primary and secondary rather than tertiary education • World Bank • HPAEs emphasized on human capital development by providing universal primary education and expanding secondary education. • Perkins • Agreed on, and complemented most parts of the study. • Quarrel: WB was too casually lumping together different human capital development challenges that faced to Muslim dominated counties versus Confucian value system dominated countries.

8. The Role of Government Interventions • World Bank • Attempts to both describe the diversity and draw general conclusions applicable to all or most. • Perkins • The diversity is enormous and making a coherent story out a that diversity is a formidable task.

9. The Historical And Political Context • World Bank • Explained what the HPAEs did to achieve rapid growth. • Perkins • Should give more attention to “why” HPAEs were able to carry out effective policies

10. The Myth of Asia’s Miracle Paul Krugman

11. - Soviet Expansion - • Initial success of a centrally planned economy (CPE) • Alarmed the U.S. and other Western nations • “The rapid growth in output could be fully explained by rapid growth in inputs:” • Employment • Education • Investment in physical capital

12. - Four Tigers - - Singapore - • Input-driven growth • Lack of technical progress • Employment swelled from 27% to 51% • Nearly a doubling of the employment rate • More educated labor force • In 1966 less than half the population had a formal education, but by 1990 two-thirds boasted a formal education • Heavy investment in physical capital • As a share of output, investment increased from 11% to over 40%

13. Contributions of the Sources of Growth (percentage)

14. - China & Japan - • Issues with China • Statistical reliability and biased data • A threshold comparison timeframe • Japan as an outlier • Exhibited heavy input-driven growth • Marked with expanding efficiency • Aligns more with western nations • Has hit a plateau

15. - Conclusion - • Perkins: • World Bank study is seen as part of an ongoing attempt to explains East Asians economies, but there is still a great deal of work needs to be done. • Krugman: • Like the Soviet expansions of the 1950’s, the Asian Miracle is nothing more than a gilded reality of input-driven growth.

16. Sources: Kim, J., & Lau, L. J. (1996). The sources of Asian Pacific economic growth. Canadian Journal of Economics, 29(2), S448. Krugman, P. (1994). The Myth of Asia’s Miracle. Foreign Affairs, 73(6), 62-78. Perkins, D. (1994). “There Are at least Three Models of East Asian Development,” World Development 22(4): 655-661. World Bank (1993). The East Asian Miracle: Economic Growth and Public Policy.