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A Facebook User

I thought this article highlighted our discussion in Monday's class about how in order to have country grow and modernize it needs to have an economy of scale and a large enough market to do that. This the classic chicken or the egg question because in order to have an economy of scale you need to have a big enough market to sustain it and vice versa. The case studies in the article show that a lot of intervention by the state which can sometimes be controversial is very necessary. Adopting export-led development strategies and open policy is crucial to growing the economy and markets, but a lot of times this change in a country doesn't happen very smoothly. I do think that a reason for this is partially due to the overcrowding in the market by the U.S., China, most of Europe, etc. so it makes it even harder for developing countries to develop

Jacob McCabe

I thought this paper gave a very comprehensive outline of the institutional barriers that many of the lagging countries have dealt with, but I found the discussions of Import Substitution Industrialization even more interesting due to the topic being discussed in-depth in my Econ of Latin America class. Specifically, I found the examples of ISI working successfully interesting because it seems that the countries of Latin America just got it wrong. The example of the Asian Tigers using ISI to transition into export-oriented economies through policymaking showed me that the cases of the Latin American economies in the mid-20th century were consequences of institutions that could not efficiently utilize their resources and labor force. For example, South Korea shifted from import-substitution to export-oriented growth at the right time. In addition, they emphasized manufacturing for modern industries through both human and physical capital. In contrast, many of the Latin American countries continued subsidizing the manufacturing of goods that could be easily imported to satisfy the domestic market. In addition, they doubled down on protectionist policies that kept them from fully realizing the potential of the global markets. This consequence of timing has led to two very different oaths of growth that are an interesting case study to reflect on.


I think this article does a fantastic job of comparing factors that have led to different economic growth and development growth rates over the last few decades. It's clear that economic disparities have widened - not only within countries themselves but between differing countries across the globe. We know that investment in physical capital, human capital, and health all will benefit development - but it's another thing to look at the real development factors that have benefitted or hurt different countries' development in recent history. When it comes to institutional barriers or the lack of developed institutions in general, I think the presence or lack of institutions is likely a positive or negative feedback loop. If a country has a good presence of institutions, those institutions will only improve themselves over time. If a country has a lack of institutions, it is extremely difficult to introduce new, successful institutions into the country and culture. While I agree with the article that institutions are the most important factor, I think the idea of TFP connects well to many of the example counties that the article discusses. How well can the country industrialize to become export-led? This is a crucial point for development. Hong Kong for example, encouraged rapid growth in their industrial sector which has now led them to be able to transition into a service based economy. Taiwan (similarly to Hong Kong) benefitted from significant foriegn investment which allowed their industries to progress. Compare these examples to countries like Ghana - where industrialization has failed. Could this be due to a lack of skills due to the lack of institutions? Côte d’Ivoire is another important example as their economy has been dependent on commodity exports for so long that all foreign investment has been centered on this commodity export - thus leaving them vulnerable. Finally, I wonder how these points connect with our Wednesday reading and the idea of freedom. How can freedom and agency help within some of these countries? Would a foreign investment in education allow for the education of individuals leading to them gaining new skills, and thus having greater agency?

Yuhan Liu

Using both quotative and qualitative methods, the authors of this paper investigated the role of institutional barriers such as “unnecessary protectionism, government misallocation, corruption, and financial instability” and TFP play in economic development. I think that by analyzing the development path of each individual country within the fast vs lagging development groups, the authors effectively show that while each country has its unique history and politics, it is possible to discern important patterns and trends from this exercise. It is clear that government policies play an important role in determining the economic trajectory of their respective country. Although hardly surprising, I think this finding provides an important insight especially at a time when neoliberalism and the force of free-market have become so popular that the role of government is often overlooked and dismissed. Immediately following this recognition begged the question of how this knowledge can be applied to actual policymaking in these laggard countries. It seems from this paper that good governance and institutions, emphasis on the development of the modern sectors, and openness to new technologies are all indispensable ingredients for economic development. So, does it mean that if the governments adopt these policies, then the country’s economic development is guaranteed? I believe the answer would be in the negative because they all have different social and political structures and thus face different challenges. Then how, can each country, while recognizing their unique challenges, remove these “institutional barriers” and make use of these policies?

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