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EH101 > Chapter 16 > Flashcards

Chapter 16 Flashcards

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1
Q

What was the Asian income level before 1950?

A

Below to Africa income

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2
Q

Who led Asian development?

A

‘Tigers’- Japan then followers

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3
Q

Who was Asia’s economic leader between 1950-1973?

A

Japan

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4
Q

Who was Asia’s economc leader between 1973-1999?

A

Singapore
Malaysia
Hong Kong
Thailand
China
Taiwan
South Korea

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5
Q

Asia in 1950

A

Average income below Africa

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6
Q

When was the Asian development?

A

1973-1999

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7
Q

Who were the Tigers?

A

Singapore
Hong Kong
Taiwan
South Korea
Malaysia
Thailand

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8
Q

When was Japans development?

A

1950-1973

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9
Q

Japans growth rate

A

1870-1913: 2% (Meiji restoration)
1913-1950: 1%
1950-1973: 8% (Begins to develop trade and promoting growth industries and therefore a promotion of education)

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10
Q

When was the growth miracle of the Asian tigers?

A

1973-1996
Growth rate of GDP per capita was greater in East Asia, than Europe, India, Latin America and Africa

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11
Q

What was the growth rate of GDP per capita of the East Asian tigers between 1973-1996?

A

Japan: 2.5%
South Korea: 7
Taiwan: 6%
Singapore: 6%
Hong Kong: 5%

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12
Q

What was the catchup with the US by Singapore?

A

1950: 15% of US GDP
1998: 90% of US GDP

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13
Q

Approaches to development: Washington consensus

A

Liberal
Market based and trade
Capitalism inn full flow
People acting in self interest
Profit maximising
Promotion of law and order (E.g. property rights)
Historical models (UK and the US but they had the use of tariffs)
Limited role of government

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14
Q

Approaches to development: Developmental states

A

Strong role of the government
Education adn human capital formation
Promote saving, investment and credit (target investment into sectors with growth potential)
Labour market institutions to build better relationships between firms and workers
Export orientation
Substitutes for missing pre-requisites, substitute human and physical capital for lacking aspects contributing to development elsewhere

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15
Q

What were the approaches to development?

A

Developmental states
The Washington consensus

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16
Q

What caused East Asian success

A

Factor accumulation (Investment and Human capital)
Export orientation
Employment

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17
Q

Investments role in East Asian success

A

Large investment shares
Sources of investment
Savings: Japan, Korea and Taiwan
FDI: Hong Kong and Singapore

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18
Q

What was the gross investment (%GDP) between 1960-94?

A

UK: 17%
Singapore: 33%
Hong Kong: 27%
Taiwan: 25%
South Korea: 25%
Japan: 33%

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19
Q

What was the stock of FDI per worker in 1998?

A

Hong Kong: $15,000
Singapore: $25000

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20
Q

Human capital formation in Asia

A

Good initial conditions in Korea, Hong Kong and Taiwan (due to Japanese colnisation)
Poor initial conditions in Indonesia and Malaysia, but then there is the accumulation

Public and private sector education -> focus on post-primary education.

Not just governments expanding schooling, but private sector training workers

1960 onwards: Investment in primary and secondary education

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21
Q

What was the average years of schooling between 1950-1990?

A

Indonesia: increased 1 to 5

Singapore increased 3 to 6

Korea increased 4 to 10 -> catch-up with Japan and UK

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22
Q

What is the correlation between the years of schooling and the growth rate for Asia?

A

Positive

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23
Q

What was exports as a % of GDP in 1998?

Study These Flashcards
A
  • Hong Kong: 102% of GDP (1998)
  • Singapore: 125% of GDP (1998)
  • Malaysia: 101% of GDP (1998)
24
Q

Employment participation in East Asia

Study These Flashcards
A

Extensive margin Baby boom followed by fertility declines → participation rates increased as babies grew up and women entered labour markets → larger labour force

Hong Kong participation rates: 39% (1960) to 63% (1985)

Intensive margin: Work long hours

25
Confucianism: Liang
Confucian values: “diligence, frugality, family solidarity, group harmony and stress on education” in Japan, South Korea, Taiwan, Hong Kong and Singapore -\> strong Chinese minorities explains growth miracle. Values led to: * “Imitation” rather than “innovation” * High saving rates -\> due to Confucian frugality Explains rapid catch-up with later slowdown of growth. BUT: simplistic explanation downplaying other factors such as FDI and education quality.
26
Japans pre-condition example:
Japan: rapid growth from 1950 from Meiji and pre-Meiji heritage -\> industrial promotion, commercial development and proto-Japanese systems. * Emphasis on education * Emphasis on developing industries
27
Korea and Taiwan pre-conditions
educational attainment 1950 suggests “impoverished sophisticates” with growth potential and low initial inequality
28
Creation of markets Development of industry holistically so develop sectors that interlink
“Coordination failures” hold back development -\> no expansion of steel industry without purchaser -\> returns to investment lower than return to coordinated investments (firms helping each other along supply chain) Government subsidised and coordinated private investment -\> allows rapid development of upstream and downstream production -\> promote growth in industries E.g. promotion of intermediate goods sectors (Automobile industry parts).
29
Cooperation
Japanese Keiretsu -\> informal group of companies owning small shares in each other’s companies -\> sharing information between companies. South Korean Chaebol -\> large industrial family-owned conglomerates Benefits of reduced information costs \> costs of cronyism
30
Labour market managment Tripartism
Tripartism: negotiations between unions, employer organisations, government to moderate wage gains and limit industrial action and disputes Cohesive employment (fewer layoffs) and wage moderation -\> increased cooperation and profits investment
31
Labour market managment: Japanese managment style:
Career employment structures predominate -\> firms incentives to invest in training as consequence (private investment in human capital) Salaries paid as bonuses based on firm performance -\> encourage cooperation. Productivity Council: limited wages of top managers to 10x lowest paid workers. Wage moderation
32
Promotion of export industries
**Provision of infrastructure** * Investment in ports, roads and electricity (Singapore) **Preferential access to capital for export-oriented firms** * Capital constrained to promote chosen industry e.g. not real estate **Development of new export markets** * Singapore Economic Development Board -\> research external demand for goods to manufacture. **Boosted reputation of exports** * Shift of reputation of quality of Japanese goods in 1950s.
33
Limitations of East Asian development states Limited labour productivity growth
* Young: Market orientation seems to matter -\> factor accumulation more important than innovation and productivity gains. * Output per worker (1970-85) \< Output per capita -\> due to increasing labour participation (extensive margin). * Annual growth in TFP (1970-85): unimpressive -\> not that different relative to other countries (Italy and Egypt TFP growth higher than Singapore, Japan, South Korea.
34
Limitations of the East Asian developmental states Financial crisis 1997-1998
Caused by collapse of Thai baht (July 1997) Development state policy contribution to onset of financial crisis -\> e.g. Thailand over-leveraged with debt BUT: Only modest decline of economic fundamentals prior to crisis -\> state not to blame. More market oriented states with better regulated financial sectors. Non-performing loans (% of total loans): High in crisis countries * Thailand: 30% * Malaysia: 23% * Korea: 22% Currency collapses in all East Asian countries (except Hong Kong) * -78% in Indonesia Crisis not due to weak economic fundamentals -\> reflects speculation/herd behaviour Challenged liberal international capital movements Rapid recovery reflects strong economic fundamentals (most countries reached pre-crisis growth levels by 2000)
35
What country experienced loss in export market shares?
Philipines
36
TFP Increases per year post 1960
Japan: 5.4% per year Hong Kong: 4.3% Korea: 4.1% Taiwan: 3.1% Developing countries: 2%
37
Korea domestic savings ratio
1963-1973: 11.7% 1973-84: 32.5%
38
What did the President of Korea do?
Urged firmed to meet their export targets
39
What were Koreas main exports?
Plywood and wigs Not forseen by the government but entrepreneurs response for exports
40
What happened after the 5% decline in Korean GDP after 1980?
Government intervention reduced Export targets and meetings disappeared and exports did fine without them
41
What was the impact of Taiwans increase in wages?
* deterioration of Singapore's competitive position without materially affecting its export composition
42
Infastructure in Hong Kong and Singapore
Up to date communication * facilities was a precondition for establishing Hong Kong and Singapore as financial centers, and it assisted in the rapid expansion of exports in Korea and Taiwan.
43
Public enterprise ratio in 1980s
Korea: 4% Japan 8%
44
Why was there high levels of investment?
Limited consumption of luxury goods Sense of national community
45
What was the nonfuel export percentage for Taiwan between 1963-1984?
0.9% to 1.73%
46
What was the impact of economies of scale as a result of overcoming the limitations of the domestic market?
Horizontal and vertical specialisation
47
Controlling inflows and outflows Control of luxury consumption
48
Why did Asia grow:
Korea: Military procurement Japan and Korea: The US wanted to show that capitalism could be successful
49
What is the Asian comparative advantage?
Cheap labour
50
What was vital for infant industry promotion
Export success
51
How did the government suppor the export industry?
52
American influence in Taiwan
people in Washington were searching for a country that would adopt outward-oriented policies in exchange for initial help by the United States, a bargain to be announced in President Eisenhower's January I960 State of the Union message.
53
What was the inflation level in Korea?
Emphassing investment at the cost of low inflation * Average inflation in Korea, 17.4% in 1960s and 19.8% in 1970s
54
What was the punishment for capital flight in Korea?
Death
55
Korean steel and ship building industry
Protection of infant industry by make domestic producers to build world-class capacities from the jump to ensure their exploitation of economies of scale and by effect, be forced to join the world market in fear of excess capacity
56
Why were there capital controls?
Prevent surplus from leaving the nation Korea relaxed them leading to crisis
57

EH101 (19 decks)

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