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Q1: What was the growth pattern of Japanese economy? :1
FAQID:647

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InputDate: 7/9/2006
Reference: Hayami, Yujiro. Development Economics, From the Poverty to the Wealth of Nations, Second Edition, Oxford University Press. p148-9
A: The hypothesis that the Marx pattern did apply in the early stage of industrialization is also supported by the results of growth accounting Japan as summarized in the lower section of the Table. This study by Hayami and Ogasawara (1999) represents a renovation of a pioneering study by Ohkawa and Rosovsky (1973) for the private non-primary sector in Japan.
Japan's study covers non-promary sector
The sector coverage is similar to Solow's (1957) but narrower than Abramovitz's (1993) for the total domestic economy in the USA. Because of this difference, the results for Japan are not comparable with those of the USA in absolute magnitudes. Yet, the estimates for the non-primary sector of Japan should be useful for identifying changes in the basic grwoth trends, especially in the modern industry and commerce. Time demarkations for the Japanese economy in the Table were made to be comparable with Abramovitz's for the US economy, albeit based on rather arbitrary judgements.
First two periods correspond to Marx pattern
It seems reasonable to assume that the Industrial Revolution, or the first spurt of industrialization in Japan, took place around the turn of the century, from the Cino-Japanese War (1893-4) to the RUsso-Japanese War (1903-4). If so, Period 1 (1888-1900) and Perios 2 (1900-20) may be presumed to correspond with a transition to initial industrialization and a drive to the advance stage of industrialization, respectively. In this earlier phase covering the first two periods, the rate of growth in real labour productivity were exceeded by those of the capital-labour ratio implying increases in the capital-output ratio. Meanwhile, the income share of capital increased, and only about 10 per cent of the labour productivity growth is explained by TFP growth, with the rest contributed by increases in capital-labour ratio.
In Japan shift to Kuznets pattern was not clear in Period 3
As in the US case, the Marx pattern that prevailed in Period 1 and 2 began to shift to the Kuznets pattern in Perios 3, as the gravitation of the manufacturing sector shifted from light to heavy industries. Above all, the relative contribution of TFP jumped to about 50 per cent. Capital's share, which reached a peak in this period, declined in the following period. Unlike the US case, the rate of growth in the capital-labour ratio continued to exceed that of labour productivity for the Period 3.
Japanese High Growth peiod did not follow Kuznets pattern
Period 4 (1958-70) was so called 'High Economic Growth' period during which Japan recorded unpresidented high rate of economic growth, closing the gap in per capita income and labour productivity vis-a-vis advanced industrial economies in Western Europe and North America. Nevertheless, this rapid growth in labour productivity was outpaced by the growth in the capital-labour ratio to imply increase in the capital-output ratio, though the absolute magnitude of this coefficient was smaller in Period 4 than Period 3. The increase in in the capital-output ratio in Period 4 correspond to a relatively modest contribution of totla productivity, explaining only about 50 per cent of labour productivity growth, as compared with about 80 per cent in the USA for the period 4. In this respect, the Japanese economy in the High Growth period did not follow a typical Kuznets pattern but followed a hybrid pattern between the Marx and the Kuznets types.
Hybrid pattern continues in Period 5
This hybrid pattern was common to bith the USA and Japan for Period 5. In fact, the slow-daown in output and productivity growth since 1970s has been rather universal among advanced industrial economies (Maddison 1995). This apparent return from the kuznets to the Marx pattern for economies to a new epoch of human history, such as 'the post-industrial society' (Bell 1973). This is a problem of far-reaching significance to advanced economies.

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Reference:
Hayami, Y and Ogasawara, J. (1999). Changes in the SOurces of Modern Economic Growth: Japan Compared with United States, Journal of Japanese and International Economies, 13(Mar.): 1-21.
Maddison, A. (1995), Monitoring the World Economy, 1820-1992 (Paris: OECD Development Center).
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Q2: What are the growth patterns of East Asian NIES? :2
FAQID:649

: global,

InputDate: 7/15/2006
Reference: Hayami, Yujiro. Development Economics, From the Poverty to the Wealth of Nations, Second Edition, Oxford University Press. p151-152
A: Why have some countries been captured by such a trap of Marx-type growth? How could this trap be avoided? This question is pertinent to public choice in middle-income economies which have accomplished the initial industrialization and are now striving to reach the advanced stage of development.
East Asian Nies followed the Marx pattern
According to studies by Jong-Il Kim and Laurence Lau (1994) and Alwyn Young (1995), the dramatic rise of the newly industrializing economies (NIES) in East Asia (including Korea, Taiwan, Hong-Kong, and Singapore) appear to follow the Marx pattern.
Econometric works are converted to the conventional growth accounting form
Kim and Lau used a translog production function with the assumption of a capital-augmenting technological progress for their growth-accounting analysis. However for the sake of comparison with the US and Japanese cases, and the Soviet case, the Kim-Lau data were transformed into a conventional growth-accounting form as shown in columns (1) through (4) in the Table, while thier original econometric estimates are shown in column (5). Results of the conventional accounting and the econometric analysis are largely the same.
TFP contributions are relatively small
The growth pattern of Asian Nies for the past three decades, shown in the upper section of the Table, contrast sharply with those of developed economies in the lower section. While the production elasticities of capital were much higher for NIEs than developed economies, the reverse was the case in the relative contribution of total productivity growth to the labour productivity growth, as shown in parentheses in columns (4) and (5).

Early phase of industrialization relies upon Marx pattern growth
Among the developed economies, Japan's pattern was closest to that of NIEs. These observations are consistent with the hypotheses that the Maex pattern in the early phase of industrialization tends to emerge more typically and persist longer among late starters of industialization, whose development is more heavily dependent on borrowed technology.
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Reference:
Kim, Jong-Il, and Lau, L.J. (1994), The Sources of Economic Growth of the EastAsian Newly Industrilized Countries, Journal of Japanese and International Economy, 8(Spt.): 235-71.
Young, Alwyn A. (1995), The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience, Quarterly Journal of Economics, 110(Aug.): 641-80
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Q3: Why growth of the Japanese economy did not make the same shift to a typical Kuznets pattern as observed in the US case? :3
FAQID:654

: global,

InputDate: 7/15/2006
Reference: Hayami, Yujiro. Development Economics, From the Poverty to the Wealth of Nations, Second Edition, Oxford University Press. p167-8
A: in Period 4 (1958-70), Japan was able to catch up with the level of the advanced industrial economies in the West. However, the percentage contribution of total factor productivity (TFP) to labour productivity growth was smaller than 60 per cent. Moreover, the capital-output ratio did increase under the extremely rapid increase in capital-labour ratio, even thoguh the income share of capital approached a level similar to that of other industrial economies.
Marx-Kuznets hybrid pattern appears when growth is based upon borrowed technology
It is possible that this Marx-Kuznets hybrid pattern tends to emerge rather universally among newly industrialized economies on the track of catching up with advanced economies based on borrowed technology. As argued by Alexander Gershankron (1962), latecomers to industrialization tend to borrow from their predeccesors the advanced technologies of high capital intensity and labour-saving effect. This capital-using and labour-saving bias in borrowed technology for recipient economies could be strengthened by international trade and foreign direct investment.
Product cycle aspects
Accordingto the theory of product cycle by Raymond Vernon (1966), multinational corporations lacate their product development base in high-income economies which are characterized by large markets for new products as well as abundant endowments of high-calibre human resources for research and development. After a product is developed in this R&D base through a series of market tests, and production process is standardize, its mass production is typically transferred to developing economies, such as Korea and Taiwan up to the 1970s and, more recently, SOuth-East Asia and China, where cheap but relatively well-educated labour is abundantly available. From this mass production base products are exported to advanced economies. Through this cycle, advanced industrial economies tend to specialize in R&D and product development activities with intensive use of highhuman capital, where newly industrialized economies (NIEs) tend to specialize in standardized mass production based on automatic machinery and cheap labour This process could well be driHayami, Yujiro. Development Economics, From the Poverty to the Wealth of Nations, Second Edition, Oxford University Press. p164-65
Japan also borrowed technology during the high-growth priod
Indeed, the process of industrialization in Japan as a latecomer was similar to that described in the Vernon theory (Shinohara, 1966; Yamazawa, 1984; Shimbo, 1995). The High Economic Growth period from the mid-1950s up to the early 1970s, corresponding to period 4 in Table in Marx pattern category, was essentially the process of very rapid technology borrowing based partly on a widened technology gap during the World War II vis-a-vis the USA, and partly on the prior establishment of human resources and R&D organizations thatfacilitated the technology borrowing. Capital-using bias inherent in borrowed technology could well explain why Japan's economic growth in Period 4 diverged from a typical Kuznets pattern as abserved for the USA.
Asian NIEs will be able to shift to Kuznets type growth
It is, therefore, likely that the Marx pattern tends to emerge more typically and persist longer in rapidly industrializing economies based on borrowed technology. This hypothesis is consistent with the experience of Asian NIEs, including Korea, Taiwan, Hongkong, and Singapore, as observed in Table in Marx pattern category. If this hypothesis is accepted, the Marx pattern experienced by Japan since the end of last century and by Asian NIEs for the past three decades cannot be considered a symptom of unsustainability, with economic growth primarily based on resource accumulation instead of improved efficiency, as argued by Paul Krugman (1994). In the Abramovitz data in Table show clearly that the USA also experiences this pattern in its early phase of industrialization. Is there any strong reason to suspect that Asian NIEs will not be able to shift to Kuznets pattern after technology borrowing is completed?
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Q4: Why has East Asian Miracle happened? :5
FAQID:683

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InputDate: 7/23/2006
Reference: World Bank. 1993. The East Asian Miracle: Economic Growth and Public Policy. Oxford University Press , World Bank. Reprinted in Leading Issues in Economic Development. Gerald Meier and James Rauch
A: The report examines the public policies of 8 high-performing Asian economies (HPAEs) from 1965 to 1990. It seeks to uncover the role those policies played in the dramatic economic growth, improved human welfare, and more equitable income distribution in Hong Kong, Indonesia, Japan, Malaysia, the Republic of Korea, Singapore, Taiwan (China), and Thailand.
HPAEs stabilized their economies with sound development policies that led to fast growth.
They were committed to sharing the new prosperity by making income distribution more equitable. Their public policies promoted rapid capital accumulation by making banks more reliable and encouraging high levels of domestic savings.

Universal primary education is enphasized
They increased the skilled labor force by providing universal primary schooling and better primary and secondary education. Agricultural policies supported productivity, while requiring only modest taxes.
Cooperation between governments and private enterprises
HPAEs kept price distortions in check and welcomed new technology and FDI. Legal and regulatory structures created a positive business environment. Cooperation between governments and private enterprises was fostered. 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. HPAEs targeted key industries for rapid development. In key areas, resource allocation was strictly managed.

Manufactured exports was promoted by government
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.

Macroeconomic stability
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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