Summary of Endogenous Growth Theories applied to

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Summary of Endogenous Growth Theories applied to
East Asian Miracles
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1. About K

• 1) High Saving Rates
•  
• High saving rates lead to rapid capital
  accumulation, which in turn lead to a rapid
  expansion of production facilities. Still the
  investment needs may exceed the domestic savings.
  Then foreign investment is important.

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• 2) High Productivity of Capital Low ICOR

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2. About L

• Growing population
• Younger population
• Long hours of works
• Disciplined workers

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3. About Human Capital

• Education and Quality of Labour
• They increased the skilled labor force by
  providing universal primary schooling and better
  primary and secondary education.

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4. High Social Capital Harmony, Order, and
Stability

• HPAEs stabilized their economies with sound
  development policies that led to fast growth.
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• 1) Equitable(Not Equal) Income Distribution
•  
• In economics theory, it is true that the higher
  the income level, the smaller the average savings
  ratio (savings divided by income). Thus some may
  think that the equitable income distribution
  promote consumption, not savings.
•  
• However, it is the matter of the degree in income
  inequality. Most of developing countries have
  extreme levels of income inequality.
•  
• The HPAE were committed to sharing the new
  prosperity by making income distribution more
  equitable. This is important in two aspects
  First, motivation al point- gross income
  inequality may lead to lack of motivation on the
  part of labor or low income class, and to a lack
  of Social Capital. The result could be a violent
  social unrest which hinders economic development.
  The example is Philippine.
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• Second, their public policies promoted rapid
  capital accumulation by making banks more
  reliable and encouraging high levels of domestic
  savings.
•  

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•  2) Harmonious Relationship between
• Workers and Employers
• 3) Harmonious Relationship between Government and
  Business
• Cooperation between governments and private
  enterprises was fostered.
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5. About Government Active and Effective
Economic Role of Government

• Economic Planning
• -Micro Level as well as Macro Level
• - Indicative Planning as well as Fine Tuning

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2) Export Oriented Economy

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• Import Substitution versus Export
  Promotion(Orientation)
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• Trade in manufactured exports was promoted by
  government-established marketing institutions.
  Analysts disagree about the effectiveness of such
  interventions, but agree that without the
  foundation of macroeconomic stability and
  development of human and physical capital, the
  expansion would not have been so dramatic and
  sustainable. This report reviews the basic
  development policies of HPAEs that created
  macroeconomic stability. It explains why most
  countries should not use government interventions
  in today's changing global economy.
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3) Industrial Policies

• Strategic Industry Plan
• Government traffic-controlling Resource
  Allocation
• Fostering Infant Industry

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4) Macroeconomic Economic Policies

• Legal and regulatory structures created a
  positive business environment. Beyond the
  fundamentals of accepted macroeconomic
  management, HPAEs adopted policies at variance
  with the notion of the "level playing field" of
  open market free enterprise.

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6. About a Broad Sense of Institution

• Instead of a specific institution we may look at
  the Foundation for Human Capital, Social Captial,
  and Government
• - Neo-Confucianism