I feel that this article doesn’t fully embrace the nuances associated with the study of institutions in economic literature. If I were to only read this article, I would think that institutions are essentially macroeconomic strategies used by governments to achieve growth. In contrast, I believe that institutions can be more easily understood as the “rules of the game” within an economy. I recognize that definition is less congruous with growth at the national level than macroeconomic strategies employed by governments. However, it most closely fits the role that the broad economic literature places on institutions. I’d love to talk more in class about how institutions affect economies on a more micro level through property rights, contract enforcement, and legal systems.
Another interesting aspect of this paper is the lack of empirical work. For the previous blog post and discussion, we talked about how ideas that aren’t formalized get forgotten. In this paper, the authors simply describe what they have observed in the world without formulating a model to explain other ideas. I feel that this type of analysis has value- however, economists like Paul Krugman might disagree. Articles that float ideas regarding the world fall in line with high development theory of the 1950s. As Krugman would say, these authors are leading their ideas out into the wilderness to die. This paper only provides supportive evidence for its conclusion- it does not convince me of a causal link.
I found this article to be compelling in its analysis, although I had some issues with the mathematical approach taken. In reading the summary analysis of successful countries (section 4.1) in the authors' data set, it was easy to identify some commonalities. What stuck out to me the most was that high-growth nations all seemed to pursue export oriented strategies, particularly in the technology sector. This made a lot of sense to me on a basic level. Globalization has obviously been on the rise since 1960 and nations that had export driven strategies would be able to take advantage of this.
However, I struggled to follow the authors' math. I feel as though there are a lot of "institutional barriers" that may get lost in using measurable variables. For example, how does TFP account for factors such as worker's rights and discrimination, factors that I believe would have impacts on a nation's development but may be hard to measure? Furthermore, how can the authors be sure that there is not an unobservable third variable that is correlated with both TFP and economic growth? Even something as seemingly basic as determining how friendly a nation is to exports may be affected by a litany of variables. In conclusion, I feel as though econometric analysis in the field of development can be a bit shaky. As so much of our analysis in development requires looking back on history, we must be cognizant of variables that are hard to define and measure.
The international export mentality of the fast-growing countries mimics Sen's argument for agency being the key factor to pull communities out of poverty, as being an export-driven society allows for greater job opportunities when the employment protocols undertake reforms to engage all citizens. The ability to work and ultimately feel like a contributor to society pulls people out of poverty more so than reliance and the 'patient' mentality of import-dependent nations. The two main points I see from this article are one, Sen's approach to instilling agency in citizens supports a community, and two, instituting reform in governmental processes to provide for opportunity goes hand-in-hand.
I find this article very informative. I like how they do a cross-country analysis of every country, which is accompanied by a short paragraph about the keys to the development of the countries. It is a very straightforward study and I enjoy that.
However, there are a few things that I must critique about this paper. My first critique is the measurements they use to quantify development. Total Factor Productivity to me is a very interesting measurement but does not capture the full economic story. TFP might be higher in countries where they are more likely to participate in international markets, but this does not essentially mean that they are more developed. And who is to say development is purely measured through a monetary lens? I feel that if Sen read this paper, he would be skeptical because TFP does not measure individualistic freedoms and inequalities within a country. If a country experiences rapid economic growth yet the most vulnerable citizens are forgotten, has the country developed or are the rich just getting richer?
In applied statistics, we have learned that is essentially never safe to assume anything unless extensive efforts are made to look into lurking variables. And by conducting such a broad study analyzing very different countries that have only one similarity, there is a high possibility that we are missing out on lurking variables. One variable that I feel is neglected is geography and physical accessibility to trade. Is it possible that geography can increase a country’s TFP simplify because they are close to large players in the international market?
This paper was enlightening as it sought to better understand why certain countries are experiencing fast economic growth relative to the United States and others are not. The researchers from the St. Louis FED attribute the differing growth rates to institutional barriers, which—in laggard countries—limit "structural transformation and economic development" mainly within technology adoption and implementation. Following my summer research, I learned of the immense efficiency and powerful effects that technology has had on the global market. Technology has allowed for input costs to fall and the quantity demanded of goods to rise. However, I found it interesting that the study used the United States as a point of comparison because as we are currently in the thick of the 4th Industrial Revolution, we are seeing somewhat "harmful" effects of technology adoption. So much adoption to the extent that jobs classified as "routine" in their daily operations are being replaced by either robotics or artificial intelligence. Although this paper does not dive into the micro-level effect of technology adoption, it ought to consider what costs are generated because modern economic growth is dependent on "skill-bias technology."
I also found a connection between this article to Nussbaum and her idea of "tragic choice." The countries that have been classified as "development laggards" due to widening income disparity between them and the United States, seem to be facing exogenous challenges that have limited the countries' ability to invest in technology infrastructure. For example, Comoros is heavily agricultural which limits their ability for "modern enrichment," using Gary Fields's terminology. Comoros also has been dealing with high fertility rates and low levels of education. Thus, it appears the country has had to make the "tragic choice" by foregoing the capabilities that would have come about from access to technology (which some would argue are essential for the modern world), in favor of dealing with affirming the capabilities of "bodily health" and "senses, imagination, and thought." It is tragic that a country has to fall behind in terms of development in order to address such issues first, yet it better than having no structural growth in any sector of the economy.
This paper proved to very fascinating in that it attempts to answer such a prevalent question today in the international political economics community. Often, I see literature that focuses on how income disparities are growing within countries, but this paper addresses and answers a valuable question of growing income disparities on the global level between countries. The paper utilizes a cross country with fast growing countries, trapped countries, and lag-behind countries. I thought the comparative analysis of all the countries in the study to the US was insightful and well thought out, as it granted perspective into the domestic industries and unique barriers countries may face with growth. Additionally, I agree with Tyler in that it feels that there is a lot of comprehensive data, yet an empirical model which provides a causal link is missing.
Moreover, I have taken many classes in IPE (International Political Economy) which often stress ideas of how free trade is not best for less developed economies. With this, the idea of infant-industry is brought up which means countries should protect domestic industries until they are capable to be competitive with other companies on a global scale (yet what industry to invest in and when to stop protectionist policies often leads to problems). Personally, I have not seen much contemporary evidence on best practices for development for countries, so I found it interesting that fasting growing countries focused on exports and competitive edges while trapped countries were import oriented with protectionist policies. Frankly, I know these trends exist, but I do not think there is a one-size-fits-all approach to economic development. Each country has a unique resource endowment, society, culture, and politics which means policies will have varying degrees of success depending on the patient. This paper draws many important points on this problem, but like with every other problem in economics ‘it depends’.
I found this paper interesting, and straightforward. I think Tyler makes a good point exclaiming that it may be too simple-perhaps there are many other factors that go into the development of a country besides government policies. However, I was surprised to see the author come to a conclusion so quickly, especially with a small sample size. On sample size, we have talked about in class how in the present day, many observations are required to make a sound paper/argument, so I also would have liked to see more countries included in his analysis. It was interesting to see that the main culprit for development is export-led growth while the downfall for trapped and lagging countries is the pattern of import substitution. I do wonder, how many countries doing import substitution is by choice rather than because they have to.
The article displayed the duality of institutional barriers when affecting economy development in an engaging manner. It was interesting to see the ways in which these barriers have both improved a country’s economy, while others have been kept from developing due to other types of barriers. The discussion on corruption stood out the most to me. It was shocking to see actual numbers of corruption’s damage in Brazil, and the country’s ranking when compared to others on corruption levels. Brazil’s system is so deeply corrupted, from high government positions all the way to street police officers, that the feeling of hope is hardly found among the population.
At Monday’s class we talked about Gini coefficients, and we graphically analyzed a few countries’ inequality levels over the decades. The graphical representation for Brazil stood out in an odd manner, almost in the shape of a line going straight down. I believe one of its factors is the institutional barriers talked about in this article, including misallocation of resources and corruption. Brazil has always had the potential to be one of the strongest economies due to its size and natural resources, but such institutional barriers have led the nation to become a laggard. I wonder what it would take for Brazil and other South American laggards to have their economies boom. My initial guess would be heavy investments in technology, but fixing these institutional barriers would need to be the countries’ main priority.
I thought that was paper was really interesting but found the idea and point a little difficult to understand as someone who has spent little time reading and analyzing international political economics and looking at institutional barriers. In my previous Economics and Poverty classes, we have discussed the growing income disparities between high development and lagging countries; however, I have never read about it in terms of the export oriented growth strategy and its impact on the development and progress of countries. I can see examples of where the paper is coming from in terms of their declaration that trapped countries, those lacking development and unable to get out, hold protectionist policies and focus on imports. However, I agree with Patrick that I think this is a tough statement to generalize to all countries. Along with this, I think that a better explanation about the specific barriers such as protectionism, government misallocation, corruption, and financial instability would have helped me wrap my head around the point of the paper more. Specifically with protectionism and what those type of policies would look like.
I also like many other students found connections with Sen and our discussion from Wednesday. The countries that are lagging don't have the agency or capability to increase development and get out of the trap. They are not in a place to invest in new technology and do not have access to capital markets, international trade, and industrialization that is critical for the country to advance with sustained economic growth.
The role of institutions in development can be both very clear and very unclear. For example, fast growing economies like South Korea and Taiwan have focused primarily on industry and creating global trade networks to boost their economy. Lesser mentioned in the paper, yet (at least I would argue) equally important is the role of bureaucratic institutions. What is the point of investing in growth industries if there is no measurement of progress, no way to know the effect of what you're doing? Furthermore, I began to wonder how legible these fast growing economies were. Basically, are we being told the whole truth, have their been any negative outcomes associated with their growth, is the reporting that is done verifiable?
My first impression after reading the paper was generally agreement. The summary table was super helpful in helping understand the development drivers for from country studies.
Although a lot of my peers have criticize this paper, I personally liked how it simplified development factors and point out the obvious drivers for countries to grow faster. I agree with their skepticism, but I also want to give points to this paper's analysis. It does have empirical evidence, but instead of developing a model, it draws on the similarities of fast-growing countries and the similarities of slow-growing countries. It is not enough for economists, but it is a wonderful paper for policy makers with less economics experience in helping them shape economics policies.
This paper doesn't scratch the surface of the problems that developing countries face and address all factors, but the basic insights it provided are much needed.
First off, I think Tyler makes a good point: for the most part, the authors aren’t really talking about institutional factors, but rather about macroeconomic policy choices (which can come about because of institutional arrangements, but, per the definitions we worked from in Professor Grazjl’s Comparative Institutional Economics course, are not themselves institutions). When the introduction made claims about the importance of institutions, I expected an analysis of the strength of various contracting and property rights institutions. I also would have preferred greater consideration and analysis of the institutional arrangements that promote or discourage corruption in the chosen countries and how that might create barriers to development, rather than just stating that a country is infamous for corruption. Honestly, this paper felt like the authors were avoiding the role of institutions rather than confronting it, given the absence of discussion about the political and bureaucratic institutions in specific countries during specific time periods. I would think that an article about the broad role of institutions would make at least some mention of the economic influences of democracy verses military dictatorship.
I am also not convinced by the authors’ case selection. The authors don’t appear to have a systematic way of determining which countries to include and which categories to classify them in, which makes me skeptical of their conclusion that establishing “correct institutions”—really, neoliberal macroeconomic policies—is the key to economic growth. Didn’t the Washington Consensus prove that there’s not a standard, one-size-fits-all neoliberal policy solution to issues of development?
Finally, I want to echo the sentiment that after readings from both Sen and our textbook, the income only approach of this article feels rather narrow and unilluminating.
One element of this paper that I feel could be expanded upon is the future modes/drivers of development. Technology and institutional barriers will be at the forefront in determining economic potential for many years to come, but what technologies will that exactly look like? The paper discusses the role that semiconductors played in Taiwan's growth, but what will the next semiconductor be? A prediction that I have is renewable energy sources. I am very interested to see what growth disparities will look like in the future between countries that do and do not invest in renewables. Furthermore, I wonder if certain countries will begin to specialize in the production of materials used in green energy, such as wind turbine props and solar cells. Another idea that I had while reading this article was that the future may come to rely upon only a few countries for the world food supply. With such an emphasis on movement to modern sectors of growth, it may not be impossible that some countries could create food monopolies. Imagine a dystopian world where wealthy countries begin to build structures where there used to be farming land. With climate change, food could become scarce and a historically impoverished agricultural country might invest in farming technology that begins to generate serious economic growth simply due to the fact that they have available land. It may not be impossible that one day the world will rely upon a few countries to supply food for the entire globe, in theory increasing prices and their GDPs to high levels.
This article made a great argument for the importance of good institutions in economic development. I found the evidence presented to show that protectionism and corruption leads to slower economic growth incredibly compelling. In addition, it is incredibly clear that government emphasis on technology and R&D leads to better economic outcomes. The authors conclusion that technology leads to higher TFP did not shock me, given that most technological developments are meant to increase efficiency in production. The analysis of each individual country also suggested that the Lewis 2-sector theory of economic development is highly effective: almost all successful countries prioritized industrial development and moved away from agriculture, while poverty-trap economies still rely on agriculture for their GDP.
Reading this article led me to believe that the effect of foreign institutions and greater foreign policy on economic development is strong. The individual analysis of each country indicated that many fast growing economies benefitted from technology sharing and investments from foreign countries. South Korea, Thailand, and Taiwan all benefitted heavily from investments and technology transfers with America and Japan. The fact that countries like Japan and America are investing in countries like South Korea, Taiwan and Thailand is not shocking; American foreign policy encourages the strengthening of certain countries to prevent an unfriendly hegemony from forming. The fact that the development of Taiwan and other countries is, in part, meant to counterbalance the growth of China is no secret. The development of countries is still partly contingent on whether more powerful countries actually want them to develop.
Along with external factors, I believe internal political factors are also important. For example: in the same time period that countries like Chile and Argentina experienced economic stagnation and a decline in foreign investments, communist and anti-communist guerillas caused chaos. Another internal factor that effects development is the citizen's trust in their government: Wang listed tax evasion as a key problem that crippled Argentinian economic policy. Both Latin American countries and the Philippines have past and present histories of authoritarian regimes, which may scare away foreign investors and disincentivize citizens from contributing to the economy. I would be very interested in reading a study which accounted for internal political strife/stability and its relation both to international investment and labor productivity within the country itself.
I thought it was interesting to read this analysis and liked the way the authors compared a variety of countries, though there are also certain topics I wish it addressed that it did not. The paper spoke of institutions but only seemed to discuss policies implemented by the state, without dwelling on the underlying institutions themselves. For example, how might a military junta affect the economic climate? What is the role of a respected judicial system? State institutions have a much greater effect than just their economic policy decisions.
Having read this paper, I would like to read an analysis that looks at economies with similar growth histories, to see what factors affect how effectively economic growth is translated into improvements in standard of living. It is important to understand factors leading to economic growth, but, as many other people have pointed out, the practical benefit that growth brings to people is important to consider as well.
One thing that I noticed from the paper was the idea that geography and history are destiny. While not explicitly mentioning it, the authors alluded to the idea that uncontrollable variables can have an oversized influence on the economic fortunes of a nation. Two of the so-called Asian Tigers were colonized by Japan. Both South Korea and Taiwan received capital investment while under Japanese control. The article even mentions how Taiwanese infrastructure was greatly improved as a result of Japanese rule. While Japanese colonialism was incredibly harsh, it was carried out in a manner that produced the foundation for economic success in the future. Both nations are solidly in the high income bracket, in part because of their forced ties to Japan. Contrasting stories of colonization occurred in the Indian ocean. Comoros and Mauritius are both island nations located off the coast of Africa. Both were colonized by European powers. Both islands were heavily involved in agriculture, particularly plantation based agriculture. Yet one was a French possession and one was a British possession. French speaking Comoros has struggled to find economic growth and stability as an independent nation. The island is still largely dependent upon exporting cash-crops with minimal investments in both human and physical capital. Mauritius on the other hand was able to leave agriculture behind. The nation has shifted toward a tourism based economy. One can only wonder if this success can be attributed to the fact that Mauritius speaks english. The English speaking world is larger and wealthier than the French speaking world, thus allowing Mauritius to market itself towards wealthy Americans, Britons, South Africans, Indians, and Australians as an exotic location without a language barrier. Comoros cannot do the same. All of this is not to suggest that the decisions regarding development are not important. They are still relevant. But I think that officials and policy makers must be aware of the context in which economies exist. That is to say that proper knowledge of the past can be a useful tool for development.
I believe that this article does an excellent job of explaining the causes for the widening of world income disparities over the last 50-100 years. It is no surprise that some of the economies seeing the sharpest growth curves over the last 50 years have also seen a dramatic increase in production and exports. On the flip side, it also comes as no surprise that countries experiencing trapped economies have large-scale corruptidon, governmental issues, and widespread disease and water treatment issues. I found it interesting how each country being analyzed in the paper was being compared to the United States in terms of development, GDP, and global exports as I no longer think of the US as one of earth’s greatest exporters.
My main critique of this paper is its characterization of development as soley economic gain. The author’s framing of the counries discussed as either fast-growing economies or trapped economies based on measures that are lacking much empirical evidence is very shortsighted in my opinion. If I’ve learned anything in this class thus far it would be that the subject of development economics is quite complex and there are many unobserved variables that economists often overlook when completing their analyses that are often converted into government policies and initiatives.
I think that this paper provides a lot of important data and does make a lot of great points. I generally agree with what the paper is saying and the summary in table 4 is helpful from a very high viewpoint. But, I believe that when one further examines the development enhancing factors and the development slowing factors, one realizes that nearly all of them are dependent on having good-faith governing bodies that have developed as their main interest. In particular, the development slowing factors often come from dictatorships or colonial regimes which frequently have different goals than development: taking resources for the colonizing country or benefits for the individual in power or their close friends. Furthermore, many of the development enhancing factors have significant barriers to entry that may make it incredibly difficult, if not impossible, for a state to implement these development strategies. The paper does an effective job of highlighting trends and good goals to try and pursue but neglects to examine the development strategies that may be more approachable for nations that are struggling to start their development journey.
I believe that this article did a nice job at showing the correlations between factors that countries to faster development and factors that led to stagnating development. With that said, I do wish that we can discuss more about import substitution and why this seems to be a development-retarding factor. I found it very interesting to see that an emphasis on technological R&D, export-driven open policies, and pro-market financial and labor institutions correlate strongly to fast development in countries, while countries with an import-driven economy and unnecessary protectionism seem to lag behind. As I don't believe that if a certain policies work for one country, it will automatically work for another, it is fascinating to see such a strong relationship with these factors leading to faster or slower development. But, if we think about it for a second, it makes complete sense why export-driven economies will develop faster than import-driven economies. This is because as you open up access in domestic markets to foreign ones, you will gain access to those other markets. While you export goods that you have a comparative advantage over you make money and you can import goods from other countries that are potentially cheaper than in your own country.
I think it is interesting to discuss the geography and relationships of the countries discussed in this article and like Gabe mentioned, the importance of technology sharing amongst countries. It is interesting to see how these Asian countries developed rapidly by sharing technological information within each other. Where as the poverty-trapped countries and the countries that have lagged behind are all also relatively close to one another. I think this point stresses the importance of foreign economic policy to help developing countries develop faster.
In class on Friday, I hope we can discuss what exactly is import substitution and discuss one countries policies that led them to develop faster than the United States and one country that lags behind to better understand what exactly happened that led to their development more clearly.
I found this paper to be fascinating in how it emphasizes the role of the government in bringing economic growth. In rich countries like Singapore and China, the government played an essential role in regulating the markets and imposing policies that promoted growth, competitiveness, production, and efficiency. My biggest takeaway is that export-led policies tend to bring change as they foster productivity, can increase domestic jobs, and bring more revenue to the government. In contrast, import-led policies tend to be inefficient since countries that rely on these policies tend to be dependent on their agricultural products, making them vulnerable to unexpected phenomena such as natural disasters.
While I agree that corruption affects development, I would have liked it if the author showed a correlation between them by bringing in some indexes or data. Though I understand corruption was not the focus of this paper, bringing correlative data between these two variables would have made the author more persuasive.
If possible I would like to know more about how the author came up with the barrier parameter. Hope this topic will be discussed in class tomorrow
I thought this paper was very interesting because it addressed what I find most interesting about development economics, which is what are the common themes between countries that are economically successful and ones that aren't. I think it is interesting to look at because if there are no common factors then there is not much for us to analyze empirically. I think it makes a lot of sense to look at too when we are considering different metrics to measure development because one would think that there would be commonality amongst those. It's a tough balance too because many countries have different natural resources in geography, land, and things like fossil fuels. It has to be hard to find commonalities though in an ever changing economy. What I mean by this is the factors that led to the U.S. growing in the 1800s are a lot different than South Korea in the 1900s. I wonder how consistent though time the factors are. For instance, the reasons for income growth are very different for two different economies.
This paper does well to describe the reasons behind economic development, or lack thereof, in fast-growing and lagging countries respectively. In other empirical studies, the data is presented in a way that forces the reader to draw their own conclusions about why the differences occur. I appreciated the country by country analysis among a range of economically successful structures. It also makes sense that the ten fast-growing countries all have export-led development strategies, whereas the poverty trapped countries have import-led policies. These poverty trapped countries are then forced to rely on agricultural based products, which tend to be highly inconsistent. I found it interesting how important institutional barriers become in economic development. It is honestly quite sad that these trapped countries with unsuccessful institutional policies are unable to escape the trap that they created for themselves. In order to escape, you obviously need increase in income, GDP, or TFP as the paper likes to cite. However, the country cannot increase these factors if they have institutional barriers that prevent them from generating growth. It is a cyclical pattern that proves to be quite unforgiving.
While the overarching takeaway from this study is that development growth in export driven and laggards are primarily driven by import substitution, especially for trapped and lagging-behind countries. One of the things that caught my attention was the comparison between Japan, South Korea, and Taiwan. The author pointed out that South Korea and Taiwan emulated many of the developmental plans, particularly tech-focused, Japan implemented that helped them become one of the first high income Asian countries. I can recall fundamental Japanese world history like its early industrial revolution and Meiji restoration, but I am still curious as to how Japan become the giant that they are. What are the the details of Japan’s economic development plans, what are the driving factors? How does Japan’s history and plan fit into a model? We’ve previously discussed that models are starting points, they are never perfect. I wonder how the core goals of Japan’s model be implemented in other countries that resemble Japan? Clearly, it can be done to e certain extent, the glaring comparison of technological growth between South Korea and Japan (Honda vs. Hyundai, Sony vs. Samsung, Hitachi vs. LG). I’m sure this has been a topic of conversation before, as a non-Econ major, I’m currently most curious about Japan’s and South Korea’s economic development plans.
This reading was really interesting as went on a case-by-case basis on the history of the development of certain countries. However, I still had some confusion with a few of the countries selected. First, Ghana was painted as a country that is lagging behind, but in recent years and even before 2019, Ghana has been seen as this almost model-like state for West African countries. In fact, after the murder of George Floyd murders of 2020, Ghana received a jump in African Americans moving full-time to the country, as it was seen as a safe and hopeful country for them. The country has been seen as a country to start new businesses, but the case study in this article made it seem like it was a country solely stuck in low-service industries. Also, Botswana is another country I had challenges with the case study. Although it is painted as a miracle, the industry is built on diamonds, a highly monopolized good. Therefore, I wonder if the government is under tight pressure from diamond corporations in their legislature, bringing up another array of concerns. Lastly, this article brought up some history of the different countries but excluded some, such as Ghana and Botswana having to endure brutal, suppressive colonialism. Even in Taiwan, the individual who instituted the economic policies, Chiang Ching Kuo, also instituted martial law in the island nation, bringing into question freedom and the actual happiness of the people during these times of economic prosperity. This paper did an effective job to discuss economic development on paper, but it still missed the concepts of Amartya Sen about combining personal freedom/well-being with economic development.
I feel that this article doesn’t fully embrace the nuances associated with the study of institutions in economic literature. If I were to only read this article, I would think that institutions are essentially macroeconomic strategies used by governments to achieve growth. In contrast, I believe that institutions can be more easily understood as the “rules of the game” within an economy. I recognize that definition is less congruous with growth at the national level than macroeconomic strategies employed by governments. However, it most closely fits the role that the broad economic literature places on institutions. I’d love to talk more in class about how institutions affect economies on a more micro level through property rights, contract enforcement, and legal systems.
Another interesting aspect of this paper is the lack of empirical work. For the previous blog post and discussion, we talked about how ideas that aren’t formalized get forgotten. In this paper, the authors simply describe what they have observed in the world without formulating a model to explain other ideas. I feel that this type of analysis has value- however, economists like Paul Krugman might disagree. Articles that float ideas regarding the world fall in line with high development theory of the 1950s. As Krugman would say, these authors are leading their ideas out into the wilderness to die. This paper only provides supportive evidence for its conclusion- it does not convince me of a causal link.
Posted by: Tyler Waldman | 09/28/2022 at 10:18 PM
I found this article to be compelling in its analysis, although I had some issues with the mathematical approach taken. In reading the summary analysis of successful countries (section 4.1) in the authors' data set, it was easy to identify some commonalities. What stuck out to me the most was that high-growth nations all seemed to pursue export oriented strategies, particularly in the technology sector. This made a lot of sense to me on a basic level. Globalization has obviously been on the rise since 1960 and nations that had export driven strategies would be able to take advantage of this.
However, I struggled to follow the authors' math. I feel as though there are a lot of "institutional barriers" that may get lost in using measurable variables. For example, how does TFP account for factors such as worker's rights and discrimination, factors that I believe would have impacts on a nation's development but may be hard to measure? Furthermore, how can the authors be sure that there is not an unobservable third variable that is correlated with both TFP and economic growth? Even something as seemingly basic as determining how friendly a nation is to exports may be affected by a litany of variables. In conclusion, I feel as though econometric analysis in the field of development can be a bit shaky. As so much of our analysis in development requires looking back on history, we must be cognizant of variables that are hard to define and measure.
Posted by: Josh Fingerhut | 09/28/2022 at 10:44 PM
The international export mentality of the fast-growing countries mimics Sen's argument for agency being the key factor to pull communities out of poverty, as being an export-driven society allows for greater job opportunities when the employment protocols undertake reforms to engage all citizens. The ability to work and ultimately feel like a contributor to society pulls people out of poverty more so than reliance and the 'patient' mentality of import-dependent nations. The two main points I see from this article are one, Sen's approach to instilling agency in citizens supports a community, and two, instituting reform in governmental processes to provide for opportunity goes hand-in-hand.
Posted by: Natalie McCaffery | 09/28/2022 at 11:47 PM
I find this article very informative. I like how they do a cross-country analysis of every country, which is accompanied by a short paragraph about the keys to the development of the countries. It is a very straightforward study and I enjoy that.
However, there are a few things that I must critique about this paper. My first critique is the measurements they use to quantify development. Total Factor Productivity to me is a very interesting measurement but does not capture the full economic story. TFP might be higher in countries where they are more likely to participate in international markets, but this does not essentially mean that they are more developed. And who is to say development is purely measured through a monetary lens? I feel that if Sen read this paper, he would be skeptical because TFP does not measure individualistic freedoms and inequalities within a country. If a country experiences rapid economic growth yet the most vulnerable citizens are forgotten, has the country developed or are the rich just getting richer?
In applied statistics, we have learned that is essentially never safe to assume anything unless extensive efforts are made to look into lurking variables. And by conducting such a broad study analyzing very different countries that have only one similarity, there is a high possibility that we are missing out on lurking variables. One variable that I feel is neglected is geography and physical accessibility to trade. Is it possible that geography can increase a country’s TFP simplify because they are close to large players in the international market?
Posted by: Eric Bazile | 09/28/2022 at 11:50 PM
This paper was enlightening as it sought to better understand why certain countries are experiencing fast economic growth relative to the United States and others are not. The researchers from the St. Louis FED attribute the differing growth rates to institutional barriers, which—in laggard countries—limit "structural transformation and economic development" mainly within technology adoption and implementation. Following my summer research, I learned of the immense efficiency and powerful effects that technology has had on the global market. Technology has allowed for input costs to fall and the quantity demanded of goods to rise. However, I found it interesting that the study used the United States as a point of comparison because as we are currently in the thick of the 4th Industrial Revolution, we are seeing somewhat "harmful" effects of technology adoption. So much adoption to the extent that jobs classified as "routine" in their daily operations are being replaced by either robotics or artificial intelligence. Although this paper does not dive into the micro-level effect of technology adoption, it ought to consider what costs are generated because modern economic growth is dependent on "skill-bias technology."
I also found a connection between this article to Nussbaum and her idea of "tragic choice." The countries that have been classified as "development laggards" due to widening income disparity between them and the United States, seem to be facing exogenous challenges that have limited the countries' ability to invest in technology infrastructure. For example, Comoros is heavily agricultural which limits their ability for "modern enrichment," using Gary Fields's terminology. Comoros also has been dealing with high fertility rates and low levels of education. Thus, it appears the country has had to make the "tragic choice" by foregoing the capabilities that would have come about from access to technology (which some would argue are essential for the modern world), in favor of dealing with affirming the capabilities of "bodily health" and "senses, imagination, and thought." It is tragic that a country has to fall behind in terms of development in order to address such issues first, yet it better than having no structural growth in any sector of the economy.
Posted by: Trip Wright | 09/29/2022 at 02:36 PM
This paper proved to very fascinating in that it attempts to answer such a prevalent question today in the international political economics community. Often, I see literature that focuses on how income disparities are growing within countries, but this paper addresses and answers a valuable question of growing income disparities on the global level between countries. The paper utilizes a cross country with fast growing countries, trapped countries, and lag-behind countries. I thought the comparative analysis of all the countries in the study to the US was insightful and well thought out, as it granted perspective into the domestic industries and unique barriers countries may face with growth. Additionally, I agree with Tyler in that it feels that there is a lot of comprehensive data, yet an empirical model which provides a causal link is missing.
Moreover, I have taken many classes in IPE (International Political Economy) which often stress ideas of how free trade is not best for less developed economies. With this, the idea of infant-industry is brought up which means countries should protect domestic industries until they are capable to be competitive with other companies on a global scale (yet what industry to invest in and when to stop protectionist policies often leads to problems). Personally, I have not seen much contemporary evidence on best practices for development for countries, so I found it interesting that fasting growing countries focused on exports and competitive edges while trapped countries were import oriented with protectionist policies. Frankly, I know these trends exist, but I do not think there is a one-size-fits-all approach to economic development. Each country has a unique resource endowment, society, culture, and politics which means policies will have varying degrees of success depending on the patient. This paper draws many important points on this problem, but like with every other problem in economics ‘it depends’.
Posted by: Patrick Rooney | 09/29/2022 at 03:25 PM
I found this paper interesting, and straightforward. I think Tyler makes a good point exclaiming that it may be too simple-perhaps there are many other factors that go into the development of a country besides government policies. However, I was surprised to see the author come to a conclusion so quickly, especially with a small sample size. On sample size, we have talked about in class how in the present day, many observations are required to make a sound paper/argument, so I also would have liked to see more countries included in his analysis. It was interesting to see that the main culprit for development is export-led growth while the downfall for trapped and lagging countries is the pattern of import substitution. I do wonder, how many countries doing import substitution is by choice rather than because they have to.
Posted by: Jack Lewis | 09/29/2022 at 03:30 PM
The article displayed the duality of institutional barriers when affecting economy development in an engaging manner. It was interesting to see the ways in which these barriers have both improved a country’s economy, while others have been kept from developing due to other types of barriers. The discussion on corruption stood out the most to me. It was shocking to see actual numbers of corruption’s damage in Brazil, and the country’s ranking when compared to others on corruption levels. Brazil’s system is so deeply corrupted, from high government positions all the way to street police officers, that the feeling of hope is hardly found among the population.
At Monday’s class we talked about Gini coefficients, and we graphically analyzed a few countries’ inequality levels over the decades. The graphical representation for Brazil stood out in an odd manner, almost in the shape of a line going straight down. I believe one of its factors is the institutional barriers talked about in this article, including misallocation of resources and corruption. Brazil has always had the potential to be one of the strongest economies due to its size and natural resources, but such institutional barriers have led the nation to become a laggard. I wonder what it would take for Brazil and other South American laggards to have their economies boom. My initial guess would be heavy investments in technology, but fixing these institutional barriers would need to be the countries’ main priority.
Posted by: Renan Silva | 09/29/2022 at 03:46 PM
I thought that was paper was really interesting but found the idea and point a little difficult to understand as someone who has spent little time reading and analyzing international political economics and looking at institutional barriers. In my previous Economics and Poverty classes, we have discussed the growing income disparities between high development and lagging countries; however, I have never read about it in terms of the export oriented growth strategy and its impact on the development and progress of countries. I can see examples of where the paper is coming from in terms of their declaration that trapped countries, those lacking development and unable to get out, hold protectionist policies and focus on imports. However, I agree with Patrick that I think this is a tough statement to generalize to all countries. Along with this, I think that a better explanation about the specific barriers such as protectionism, government misallocation, corruption, and financial instability would have helped me wrap my head around the point of the paper more. Specifically with protectionism and what those type of policies would look like.
I also like many other students found connections with Sen and our discussion from Wednesday. The countries that are lagging don't have the agency or capability to increase development and get out of the trap. They are not in a place to invest in new technology and do not have access to capital markets, international trade, and industrialization that is critical for the country to advance with sustained economic growth.
Posted by: Sarah Wittpenn | 09/29/2022 at 04:02 PM
The role of institutions in development can be both very clear and very unclear. For example, fast growing economies like South Korea and Taiwan have focused primarily on industry and creating global trade networks to boost their economy. Lesser mentioned in the paper, yet (at least I would argue) equally important is the role of bureaucratic institutions. What is the point of investing in growth industries if there is no measurement of progress, no way to know the effect of what you're doing? Furthermore, I began to wonder how legible these fast growing economies were. Basically, are we being told the whole truth, have their been any negative outcomes associated with their growth, is the reporting that is done verifiable?
Posted by: Sherman Golden | 09/29/2022 at 04:13 PM
My first impression after reading the paper was generally agreement. The summary table was super helpful in helping understand the development drivers for from country studies.
Although a lot of my peers have criticize this paper, I personally liked how it simplified development factors and point out the obvious drivers for countries to grow faster. I agree with their skepticism, but I also want to give points to this paper's analysis. It does have empirical evidence, but instead of developing a model, it draws on the similarities of fast-growing countries and the similarities of slow-growing countries. It is not enough for economists, but it is a wonderful paper for policy makers with less economics experience in helping them shape economics policies.
This paper doesn't scratch the surface of the problems that developing countries face and address all factors, but the basic insights it provided are much needed.
Posted by: Ngoc Le | 09/29/2022 at 04:48 PM
First off, I think Tyler makes a good point: for the most part, the authors aren’t really talking about institutional factors, but rather about macroeconomic policy choices (which can come about because of institutional arrangements, but, per the definitions we worked from in Professor Grazjl’s Comparative Institutional Economics course, are not themselves institutions). When the introduction made claims about the importance of institutions, I expected an analysis of the strength of various contracting and property rights institutions. I also would have preferred greater consideration and analysis of the institutional arrangements that promote or discourage corruption in the chosen countries and how that might create barriers to development, rather than just stating that a country is infamous for corruption. Honestly, this paper felt like the authors were avoiding the role of institutions rather than confronting it, given the absence of discussion about the political and bureaucratic institutions in specific countries during specific time periods. I would think that an article about the broad role of institutions would make at least some mention of the economic influences of democracy verses military dictatorship.
I am also not convinced by the authors’ case selection. The authors don’t appear to have a systematic way of determining which countries to include and which categories to classify them in, which makes me skeptical of their conclusion that establishing “correct institutions”—really, neoliberal macroeconomic policies—is the key to economic growth. Didn’t the Washington Consensus prove that there’s not a standard, one-size-fits-all neoliberal policy solution to issues of development?
Finally, I want to echo the sentiment that after readings from both Sen and our textbook, the income only approach of this article feels rather narrow and unilluminating.
Posted by: El Ellenz | 09/29/2022 at 05:13 PM
One element of this paper that I feel could be expanded upon is the future modes/drivers of development. Technology and institutional barriers will be at the forefront in determining economic potential for many years to come, but what technologies will that exactly look like? The paper discusses the role that semiconductors played in Taiwan's growth, but what will the next semiconductor be? A prediction that I have is renewable energy sources. I am very interested to see what growth disparities will look like in the future between countries that do and do not invest in renewables. Furthermore, I wonder if certain countries will begin to specialize in the production of materials used in green energy, such as wind turbine props and solar cells. Another idea that I had while reading this article was that the future may come to rely upon only a few countries for the world food supply. With such an emphasis on movement to modern sectors of growth, it may not be impossible that some countries could create food monopolies. Imagine a dystopian world where wealthy countries begin to build structures where there used to be farming land. With climate change, food could become scarce and a historically impoverished agricultural country might invest in farming technology that begins to generate serious economic growth simply due to the fact that they have available land. It may not be impossible that one day the world will rely upon a few countries to supply food for the entire globe, in theory increasing prices and their GDPs to high levels.
Posted by: Will Fearey | 09/29/2022 at 05:14 PM
This article made a great argument for the importance of good institutions in economic development. I found the evidence presented to show that protectionism and corruption leads to slower economic growth incredibly compelling. In addition, it is incredibly clear that government emphasis on technology and R&D leads to better economic outcomes. The authors conclusion that technology leads to higher TFP did not shock me, given that most technological developments are meant to increase efficiency in production. The analysis of each individual country also suggested that the Lewis 2-sector theory of economic development is highly effective: almost all successful countries prioritized industrial development and moved away from agriculture, while poverty-trap economies still rely on agriculture for their GDP.
Reading this article led me to believe that the effect of foreign institutions and greater foreign policy on economic development is strong. The individual analysis of each country indicated that many fast growing economies benefitted from technology sharing and investments from foreign countries. South Korea, Thailand, and Taiwan all benefitted heavily from investments and technology transfers with America and Japan. The fact that countries like Japan and America are investing in countries like South Korea, Taiwan and Thailand is not shocking; American foreign policy encourages the strengthening of certain countries to prevent an unfriendly hegemony from forming. The fact that the development of Taiwan and other countries is, in part, meant to counterbalance the growth of China is no secret. The development of countries is still partly contingent on whether more powerful countries actually want them to develop.
Along with external factors, I believe internal political factors are also important. For example: in the same time period that countries like Chile and Argentina experienced economic stagnation and a decline in foreign investments, communist and anti-communist guerillas caused chaos. Another internal factor that effects development is the citizen's trust in their government: Wang listed tax evasion as a key problem that crippled Argentinian economic policy. Both Latin American countries and the Philippines have past and present histories of authoritarian regimes, which may scare away foreign investors and disincentivize citizens from contributing to the economy. I would be very interested in reading a study which accounted for internal political strife/stability and its relation both to international investment and labor productivity within the country itself.
Posted by: Gabe Miller | 09/29/2022 at 07:44 PM
I thought it was interesting to read this analysis and liked the way the authors compared a variety of countries, though there are also certain topics I wish it addressed that it did not. The paper spoke of institutions but only seemed to discuss policies implemented by the state, without dwelling on the underlying institutions themselves. For example, how might a military junta affect the economic climate? What is the role of a respected judicial system? State institutions have a much greater effect than just their economic policy decisions.
Having read this paper, I would like to read an analysis that looks at economies with similar growth histories, to see what factors affect how effectively economic growth is translated into improvements in standard of living. It is important to understand factors leading to economic growth, but, as many other people have pointed out, the practical benefit that growth brings to people is important to consider as well.
Posted by: Ian Kinney | 09/29/2022 at 07:55 PM
One thing that I noticed from the paper was the idea that geography and history are destiny. While not explicitly mentioning it, the authors alluded to the idea that uncontrollable variables can have an oversized influence on the economic fortunes of a nation. Two of the so-called Asian Tigers were colonized by Japan. Both South Korea and Taiwan received capital investment while under Japanese control. The article even mentions how Taiwanese infrastructure was greatly improved as a result of Japanese rule. While Japanese colonialism was incredibly harsh, it was carried out in a manner that produced the foundation for economic success in the future. Both nations are solidly in the high income bracket, in part because of their forced ties to Japan. Contrasting stories of colonization occurred in the Indian ocean. Comoros and Mauritius are both island nations located off the coast of Africa. Both were colonized by European powers. Both islands were heavily involved in agriculture, particularly plantation based agriculture. Yet one was a French possession and one was a British possession. French speaking Comoros has struggled to find economic growth and stability as an independent nation. The island is still largely dependent upon exporting cash-crops with minimal investments in both human and physical capital. Mauritius on the other hand was able to leave agriculture behind. The nation has shifted toward a tourism based economy. One can only wonder if this success can be attributed to the fact that Mauritius speaks english. The English speaking world is larger and wealthier than the French speaking world, thus allowing Mauritius to market itself towards wealthy Americans, Britons, South Africans, Indians, and Australians as an exotic location without a language barrier. Comoros cannot do the same. All of this is not to suggest that the decisions regarding development are not important. They are still relevant. But I think that officials and policy makers must be aware of the context in which economies exist. That is to say that proper knowledge of the past can be a useful tool for development.
Posted by: Cal Christianson | 09/29/2022 at 07:57 PM
I believe that this article does an excellent job of explaining the causes for the widening of world income disparities over the last 50-100 years. It is no surprise that some of the economies seeing the sharpest growth curves over the last 50 years have also seen a dramatic increase in production and exports. On the flip side, it also comes as no surprise that countries experiencing trapped economies have large-scale corruptidon, governmental issues, and widespread disease and water treatment issues. I found it interesting how each country being analyzed in the paper was being compared to the United States in terms of development, GDP, and global exports as I no longer think of the US as one of earth’s greatest exporters.
My main critique of this paper is its characterization of development as soley economic gain. The author’s framing of the counries discussed as either fast-growing economies or trapped economies based on measures that are lacking much empirical evidence is very shortsighted in my opinion. If I’ve learned anything in this class thus far it would be that the subject of development economics is quite complex and there are many unobserved variables that economists often overlook when completing their analyses that are often converted into government policies and initiatives.
Posted by: Will Kistler | 09/29/2022 at 08:07 PM
I think that this paper provides a lot of important data and does make a lot of great points. I generally agree with what the paper is saying and the summary in table 4 is helpful from a very high viewpoint. But, I believe that when one further examines the development enhancing factors and the development slowing factors, one realizes that nearly all of them are dependent on having good-faith governing bodies that have developed as their main interest. In particular, the development slowing factors often come from dictatorships or colonial regimes which frequently have different goals than development: taking resources for the colonizing country or benefits for the individual in power or their close friends. Furthermore, many of the development enhancing factors have significant barriers to entry that may make it incredibly difficult, if not impossible, for a state to implement these development strategies. The paper does an effective job of highlighting trends and good goals to try and pursue but neglects to examine the development strategies that may be more approachable for nations that are struggling to start their development journey.
Posted by: Joe Jackson | 09/29/2022 at 08:24 PM
I believe that this article did a nice job at showing the correlations between factors that countries to faster development and factors that led to stagnating development. With that said, I do wish that we can discuss more about import substitution and why this seems to be a development-retarding factor. I found it very interesting to see that an emphasis on technological R&D, export-driven open policies, and pro-market financial and labor institutions correlate strongly to fast development in countries, while countries with an import-driven economy and unnecessary protectionism seem to lag behind. As I don't believe that if a certain policies work for one country, it will automatically work for another, it is fascinating to see such a strong relationship with these factors leading to faster or slower development. But, if we think about it for a second, it makes complete sense why export-driven economies will develop faster than import-driven economies. This is because as you open up access in domestic markets to foreign ones, you will gain access to those other markets. While you export goods that you have a comparative advantage over you make money and you can import goods from other countries that are potentially cheaper than in your own country.
I think it is interesting to discuss the geography and relationships of the countries discussed in this article and like Gabe mentioned, the importance of technology sharing amongst countries. It is interesting to see how these Asian countries developed rapidly by sharing technological information within each other. Where as the poverty-trapped countries and the countries that have lagged behind are all also relatively close to one another. I think this point stresses the importance of foreign economic policy to help developing countries develop faster.
In class on Friday, I hope we can discuss what exactly is import substitution and discuss one countries policies that led them to develop faster than the United States and one country that lags behind to better understand what exactly happened that led to their development more clearly.
Posted by: Kyle Lutz | 09/29/2022 at 08:33 PM
I found this paper to be fascinating in how it emphasizes the role of the government in bringing economic growth. In rich countries like Singapore and China, the government played an essential role in regulating the markets and imposing policies that promoted growth, competitiveness, production, and efficiency. My biggest takeaway is that export-led policies tend to bring change as they foster productivity, can increase domestic jobs, and bring more revenue to the government. In contrast, import-led policies tend to be inefficient since countries that rely on these policies tend to be dependent on their agricultural products, making them vulnerable to unexpected phenomena such as natural disasters.
While I agree that corruption affects development, I would have liked it if the author showed a correlation between them by bringing in some indexes or data. Though I understand corruption was not the focus of this paper, bringing correlative data between these two variables would have made the author more persuasive.
If possible I would like to know more about how the author came up with the barrier parameter. Hope this topic will be discussed in class tomorrow
Posted by: Chadrack Bantange | 09/29/2022 at 09:24 PM
I thought this paper was very interesting because it addressed what I find most interesting about development economics, which is what are the common themes between countries that are economically successful and ones that aren't. I think it is interesting to look at because if there are no common factors then there is not much for us to analyze empirically. I think it makes a lot of sense to look at too when we are considering different metrics to measure development because one would think that there would be commonality amongst those. It's a tough balance too because many countries have different natural resources in geography, land, and things like fossil fuels. It has to be hard to find commonalities though in an ever changing economy. What I mean by this is the factors that led to the U.S. growing in the 1800s are a lot different than South Korea in the 1900s. I wonder how consistent though time the factors are. For instance, the reasons for income growth are very different for two different economies.
Posted by: Andrew Arnold | 09/29/2022 at 09:41 PM
This paper does well to describe the reasons behind economic development, or lack thereof, in fast-growing and lagging countries respectively. In other empirical studies, the data is presented in a way that forces the reader to draw their own conclusions about why the differences occur. I appreciated the country by country analysis among a range of economically successful structures. It also makes sense that the ten fast-growing countries all have export-led development strategies, whereas the poverty trapped countries have import-led policies. These poverty trapped countries are then forced to rely on agricultural based products, which tend to be highly inconsistent. I found it interesting how important institutional barriers become in economic development. It is honestly quite sad that these trapped countries with unsuccessful institutional policies are unable to escape the trap that they created for themselves. In order to escape, you obviously need increase in income, GDP, or TFP as the paper likes to cite. However, the country cannot increase these factors if they have institutional barriers that prevent them from generating growth. It is a cyclical pattern that proves to be quite unforgiving.
Posted by: Tyler Smith | 09/29/2022 at 11:26 PM
While the overarching takeaway from this study is that development growth in export driven and laggards are primarily driven by import substitution, especially for trapped and lagging-behind countries. One of the things that caught my attention was the comparison between Japan, South Korea, and Taiwan. The author pointed out that South Korea and Taiwan emulated many of the developmental plans, particularly tech-focused, Japan implemented that helped them become one of the first high income Asian countries. I can recall fundamental Japanese world history like its early industrial revolution and Meiji restoration, but I am still curious as to how Japan become the giant that they are. What are the the details of Japan’s economic development plans, what are the driving factors? How does Japan’s history and plan fit into a model? We’ve previously discussed that models are starting points, they are never perfect. I wonder how the core goals of Japan’s model be implemented in other countries that resemble Japan? Clearly, it can be done to e certain extent, the glaring comparison of technological growth between South Korea and Japan (Honda vs. Hyundai, Sony vs. Samsung, Hitachi vs. LG). I’m sure this has been a topic of conversation before, as a non-Econ major, I’m currently most curious about Japan’s and South Korea’s economic development plans.
Posted by: T. Nguyen | 09/30/2022 at 01:43 AM
This reading was really interesting as went on a case-by-case basis on the history of the development of certain countries. However, I still had some confusion with a few of the countries selected. First, Ghana was painted as a country that is lagging behind, but in recent years and even before 2019, Ghana has been seen as this almost model-like state for West African countries. In fact, after the murder of George Floyd murders of 2020, Ghana received a jump in African Americans moving full-time to the country, as it was seen as a safe and hopeful country for them. The country has been seen as a country to start new businesses, but the case study in this article made it seem like it was a country solely stuck in low-service industries. Also, Botswana is another country I had challenges with the case study. Although it is painted as a miracle, the industry is built on diamonds, a highly monopolized good. Therefore, I wonder if the government is under tight pressure from diamond corporations in their legislature, bringing up another array of concerns. Lastly, this article brought up some history of the different countries but excluded some, such as Ghana and Botswana having to endure brutal, suppressive colonialism. Even in Taiwan, the individual who instituted the economic policies, Chiang Ching Kuo, also instituted martial law in the island nation, bringing into question freedom and the actual happiness of the people during these times of economic prosperity. This paper did an effective job to discuss economic development on paper, but it still missed the concepts of Amartya Sen about combining personal freedom/well-being with economic development.
Posted by: Kit Lombard | 09/30/2022 at 10:24 AM