Regional perspectives - East asia

Question 1

what has east asian growth been like

Answer 1

• SEG over past 70 years
• rapid economic growth
• fast reduction in poverty headcount

Question 2

according to solow model why has east asia grown so fast

Answer 2

1. capital accumulation (move along y)
2. TFP growth (shift y curve)

Question 3

what are the proximate causes behind strong East asian growth

Answer 3

1. increase in savings and FDI
2. investment in HC, K, R&D
3. strong labour markets

Question 4

what are the fundamental causes behind east asian growth

Answer 4

1. openness and export orientated growth
2. good institutions
3. culture

Question 5

why is export led growth good

Answer 5

• gains in income
• manufacturing =
• increase productivity
• increases wages, lower consumer prices, lower living costs
• economies of scale
• gains from unconditional convergence in aggregate manufacturing = most productivity gains

Question 6

what is the dynamic transition

Answer 6

move from labour intensive to capital intensive and very technologically advanced manufacturing
- high tech manufacturing

Question 7

what are the 5 channels that exports matter for growth

Answer 7

1. demand expansion
2. competition
3. cheaper inputs
4. externalities
5. FDI

Question 8

export growth - demand expansion

Answer 8

• increasing X increases GDP
• increased demand beyond domestic demand
• increasing returns to scale = productivity gains
• reduced costs from specialisation

Question 9

export growth - competition

Answer 9

• increases quality and technology
• become more efficient
• continue innovating
• incorporate competitors standards
• learning spillovers
• keep production costs low = increase productivity

Question 10

export growth - access to cheaper inputs

Answer 10

• also aided by policy - lowering tariffs - FTA
• increases productivity

Question 11

export growth - externalities and FDI

Answer 11

• knowlegde spillovers to other non-trading sectors

FDI
- exports attract FDI

Question 12

do exports lead to growth
or does growth lead to exports

Answer 12

reverse causality
- there is correlation between exports and growth

Question 13

is exports what matters
or other things like

Answer 13

structural transformation
policy

Question 14

how has industrial policy played a part in asian development

how involved was the government

Answer 14

• not laissez-faire approach
• policies implemented to promote export industries and SEG

Question 15

what are examples of Industrial policy used to promote SEG

Answer 15

1. promoting export industry = infrastructure, access to capital
2. subsidies = boost productivity of trading firms
3. management of labour markets
4. redistributive welfare policies

Question 16

South Korea
how did the government help develop the heavy chemical sector HCI in south korea

Answer 16

• gov channeled credit into HCI sector
• subsidies
• access to foreign borrowing - with lower IR
• public loans for equipment
• policies to increase HC

these did help increase sales

Question 17

so can we say that Industrial policy plays a big part in the east asian development

Answer 17

• somewhat
• policy did foster growth
• but other countries that tried to implement these polices and failed
• SK had correct fundamentals in place for these policies to be successful : HC accumulation, good institutions

Question 18

why did all east asian countries see an increase in savings

Answer 18

• high savings = high investments rates

Question 19

why were savings so high in east asia

Answer 19

1. creation of institutions to promote savings
2. compulsory saving schemes for retirement
3. land reforms - increase productivity = increase income + savings
4. culture = confucianism = promotes frugality, education, harmony

Question 20

how did east asia translate high savings into high investment

Answer 20

1. restrictions on consumer credit = invest instead of buying a house
2. low IR = corporations investing
3. incentives - firms that invest the most are rewarded with cheap credit