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Thorbecke_and_Wan_Allyn_Young_Essay -...

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Revisiting East (and South East) Asia’s Development Model (3M11 MVR Cornell University, [email protected] , 607-255-2066) Summary: This paper revisits the development of East and much of Southeast Asia after World War Two, to identify the key elements contributing to their success. A simple model is presented to assess the performance of over one hundred countries between 1961 and 1997, in reducing the per capita income gap relative to the U.S. East Asia performed best and six common core elements were identified: emphasis on agricultural development and rural education; macroeconomic stability; opening up the economy to acquire technology; emulating the technological leader; and taking advantage of both the East and Southeast Asian connections and unused growth potential. Keywords: development model, growth, East and Southeast Asia, catching up, technology
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Revisiting East (and South East) Asia’s Development Model 1. Introduction The major objective of this paper is to attempt to understand why East Asia’s development performance was so much more successful than that of other developing countries. The East Asian experience is well known but not as well understood as it should. In this paper we shall follow Kuznets (1982) in attempting to offer a more integrated explanation for the past successes of, and future challenges faced by East Asia than in previous approaches to this question based on three critical factors and corresponding phases of development: (1) In a world of interdependent evolution, openness is a necessary but not a sufficient condition for successful development. In order to benefit from openness, countries need to reach, first, the take-off point which, in turn, requires the generation of an intersectoral transfer from agriculture (i.e. an agricultural surplus) to finance the physical infrastructure and a pragmatically educated labor force; (2) In the next phase, successful development calls for industrialization that brings along continuous structural and technological upgrading. During this potentially high growth phase, the role of the government is to maintain macroeconomic stability, overcome possible coordination failure and act as an umpire in promoting growth pioneers; (3) In the mature phase, there exists a risk that those countries that have achieved to reduce their technological gap with the leader (the U.S.) might attempt to extend arbitrarily the high growth phase resulting in "asset bubbles" and debt crises. The stagnation of Myanmar that still lingers in the pre-take-off phase, the de- industrialization of Hong Kong, and the recession of Japan in the nineties testify to the consequences of ignoring these three critical factors in their respective development phases. We argue that East Asia ( Japan, South Korea, Taiwan, Singapore, Hong Kong and China) and to a lesser degree Southeast Asia ( Indonesia, Malaysia and Thailand) adopted an essentially common core of policies and institutions, including at an early stage emphasizing agricultural development and education until the take-off point was reached and then gradually 2
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Thorbecke_and_Wan_Allyn_Young_Essay -...

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