GoalsoftheCourse

AsianEconomy
LectureNote1

Introduction
YasuyukiTodo WasedaUniversity

Tounderstand Sourcesofandobstaclestoeconomic growth/developmentofAsianeconomies Payingparticularattentionto Growththeoryandempirics Internationalizationoffirms Industrialclusters Governments Institutions Ruraldevelopment
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Whyshouldwecaregrowth inpercapitaincome?
Theincomelevel(ortheconsumptionlevel)
isdirectlyrelatedtohappiness. isindirectlyrelatedtohappiness, sinceincome health&longlife(includingkids).

Wealthierishealthier.
(PritchettandSummers,1996)

Borooah(2006)
Datafrom113,000personsin80countries Happinessisrelatedtohaving highlivingstandards goodhealth agoodfamilyandsociallife.
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Wealthierishealthier.
(PritchettandSummers,1996)

Growthisgoodforthepoor.
(DollarandKraay,2002)

Wealthierishappier.
(OECDBetterLifeIndex)
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Wealthierishappier.
(OECDBetterLifeIndex)
Indicator of life satisfaction
100
Denmark Netherlands Finland Sweden New Zealand Israel Mexico Chile Canada Switzerland Belgium Australia Austria Ireland United States United Kingdom Iceland

New Zealand

Australia Canada Sweden

Better life index

Poland

Korea Greece

60

Japan Israel Spain CzechSlovenia Republic Italy

80

Norway Denmark SwitzerlandUnited States Finland Netherlands Iceland United Kingdom Austria Ireland Germany Belgium France

Norway

Slovak Republic Hungary Portugal Estonia

Czech Republic Italy Spain

Germany France

Chile Mexico

Poland Turkey

Greece Slovenia Japan Portugal Korea

40

Turkey

20

Slovak Republic Estonia Hungary

10000

20000

30000

40000

50000

10000

20000

30000

40000

50000

GDP per capita (PPP)

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GDP per capita (PPP)

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Crosscountrycomparisonofincomepercapita PPP(purchasingpowerparity)adjustedrealGDP
PPPadjusted:GDPevaluatedusingthesamepricelevel acrosscountries Real:GDPevaluatedusingpricelevelsinthebaseyear LDCs:PPPadjustedGDP>nominalGDP PricesarelowinLDCs.

PPPadjustedrealGDP:Anexample
JapanandtheUS (assumingtheyproduceonlyrice)
Produc tion (kg) A 2000 Japan US 2010 Japan US
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Price /kg B

GDP

Exchange rate C

GDP in$ A*B/C

PPP PPP adjuste adjusted dreal realprice GDP D A*D

A*B

Availableonlineforfree
PennWorldTables8.0
(http://www.rug.nl/research/ggdc/data/pennworldtable)

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Y1000 Y10,000 $5 $75

100Y/$

100 75

$5 $5

$50 $75

WorldBanksWorldDevelopmentIndicators
(http://data.worldbank.org/)

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Y900 $6

Y9,900 $120

80Y/$

124 120

$5 $5

$55 $100
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Variationinincomegrowth
Highest growth countries 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Equatorial Guinea China Taiwan Korea, Republic of Botswana Singapore Hong Kong Thailand Malaysia Romania Sri Lanka Indonesia Japan Cyprus Seychelles Egypt Panama Morocco Ireland India PPP-adjusted Annual real GDP per growth rate worker (%) 1960 2010 1960-2010 611 13958 6.3 331 7130 6.1 1861 32105 5.7 1656 26609 5.6 674 9675 5.3 4383 55862 5.1 3280 38685 4.9 954 8065 4.3 1434 11956 4.2 1371 9378 3.8 610 4063 3.8 665 3966 3.6 5586 31447 3.5 3357 18756 3.4 5963 32241 3.4 920 4854 3.3 2120 10857 3.3 715 3622 3.2 7223 34877 3.1 720 3477 3.1 Annual PPP-adjusted real growth rate GDP per worker (%) 1960 2010 1960-2010 91 Jamaica 6417 8539 0.6 92 Venezuela 7016 9071 0.5 93 Cameroon 1416 1748 0.4 94 Kenya 1020 1247 0.4 95 Comoros 741 856 0.3 96 Burundi 343 396 0.3 97 Gambia, The 1124 1271 0.2 98 Zambia 1351 1517 0.2 99 Zimbabwe 285 319 0.2 100 Nigeria 1552 1695 0.2 101 Senegal 1405 1469 0.1 102 Togo 714 733 0.1 103 Guinea-Bissau 784 798 0.0 104 Nicaragua 2457 2290 -0.1 105 Haiti 1513 1410 -0.1 106 Guinea 914 788 -0.3 107 Madagascar 1051 703 -0.8 108 Central African Rep 968 589 -1.0 109 Niger 861 522 -1.0 110 Congo, Dem. Rep. 696 241 -2.1 Lowest growth countries

Recently,winnersaredifferent.
EastAsiaversusSubSaharanAfrica
PPP-adjusted Annual real GDP per growth rate worker (%) 1960 2010 1960-2010 611 13958 6.3 331 7130 6.1 1861 32105 5.7 1656 26609 5.6 674 9675 5.3 4383 55862 5.1 3280 38685 4.9 954 8065 4.3 1434 11956 4.2 1371 9378 3.8 610 4063 3.8 665 3966 3.6 5586 31447 3.5 3357 18756 3.4 5963 32241 3.4 920 4854 3.3 2120 10857 3.3 715 3622 3.2 7223 34877 3.1 720 3477 3.1 PPP-adjusted Annual real GDP per growth rate worker (%) 2000 2010 2000-2010 13.2 2521 9474 9.3 2822 7130 9.2 4911 12303 9.0 428 1049 8.9 22487 54790 8.6 5936 13958 7.9 6155 13503 7.8 2332 5108 7.8 62387 136248 7.7 2517 5411 6.7 477 934 6.7 15763 30749 6.6 3414 6617 6.5 1369 2624 6.4 3731 7044 6.1 1023 1892 6.1 726 1331 5.9 1922 3477 5.9 1538 2780 5.8 437 781

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Equatorial Guinea China Taiwan Korea, Republic of Botswana Singapore Hong Kong Thailand Malaysia Romania Sri Lanka Indonesia Japan Cyprus Seychelles Egypt Panama Morocco Ireland India

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Azerbaijan China Kazakhstan Afghanistan Macao Equatorial Guinea Belarus Angola Qatar Armenia Sierra Leone Trinidad &Tobago Albania Laos Ukraine Cambodia Chad India Vietnam Mozambique

Source:PWT7.1

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Source:PWT7.1

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Sourcesofgrowthinincomepercapita
Capitalstock(infrastructureandequipment)? Humancapital(gainedfromeducation)? Technology(knowledge,ideas)? Inputs
Capital stock Technology Labor Human capital

Accumulationofphysicalandhumancapital
Sourcesofshortrungrowth But,theeffectdiminishesinthelongrun.
equipment eectof1addi onalunitonoutput educa on eectof1addi onalyearofschoolingonoutput

Outputs
(products, services)

Income

Accumulationofcapitalstops. Growthstops.

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Technologicalprogressis theultimatesourceofgrowth.
Returnstoinnovationdonotdiminish. Technologyimprovesforever. ( Returnstocapitalaccumulationalsoincrease.) Growthlastsforever. Variationinproductivityaccountsfor 60%ofthevariationinincomepercapita. (Caselli,2005) Importantissueinthiscourse: Howcanweacceleratetechnologicalprogress inLDCs?

TFP(ameasureofthetechnologylevel) andGDPpercapitaarecloselyrelated.

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References
BorooahV.K.(2006).HowMuchHappinessIsThereintheWorld?ACrossCountry Study.AppliedEconomicsLetters. 13(8),48388. CaselliF.(2005).AccountingforCrossCountryIncomeDifferences.InP.Aghion andS.N.Durlauf(Eds.),HandbookofEconomicGrowth.Amsterdam:North Holland. DollarD.andKraayA.(2002).GrowthisGoodforthePoor.JournalofEconomic Growth. 7(3),195225. PritchettL.andSummersL.H.(1996).Wealthierishealthier.JournalofHuman Resources. 31(4),84168.

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