The Economics of Rapid Growth: The Experience of Japan and Korea (review)

Abstract

276KOREAN STUDIES, VOL. 20 The Economics ofRapid Growth: The Experience ofJapan and Korea, by Dirk Pilat. Aldershot, Hampshire: Edward Elgar, 1994. 334 pp. The purpose of Dirk Pilaf s study is to "analyze economic growth in Japan and Korea and assess the role of catch-up in their respective processes of economic development" (1). Given the large number of poor developing countries, why and how these two East Asian countries have developed so successfully is a topic of great interest to anyone concerned with economic development. This book is therefore a welcome addition to the large and growing literature on the economies in East Asia and economic development in general. The basic hypothesis of this study is that Japan and Korea have succeeded in condensing into a relatively short span of time the growth process that lasted for a longer period of time in the case of the present industrialized countries of Europe and North America. The experience of Japan and Korea thus demonstrates, according to the author, the importance of the "catch-up factor" in economic growth. Catch-up by relatively backward countries is possible because of their ready access to advanced knowledge available from more industrialized countries. However, the reason why Japan and Korea have succeeded in catching up while many other developing countries have not is that those two countries possessed the social capability necessary for absorbing advanced knowledge. Some of the elements of their social capability are widespread education, the establishment of financial and commercial institutions , the destruction of old class structures, and a relatively homogenous population . The author also points out that historical backgrounds of Japan and Korea were important in creating such a social capability. The book may be divided into three parts. The first part, chapters 1 and 2, presents an abbreviated version of the modern history of the two countries. Economists specializing in Japan and Korea will find very little that is new in these two chapters, although they will provide an adequate historical introduction for nonspecialists. The second part, chapters 4 and 5, is really the core of the book. It is devoted to identifying the sources of economic growth in Japan and Korea by the use of growth accounting. Chapters 6 through 9, which together make the third part, are on methodology and international comparison . The book also contains a large number of tables presenting numerous data on Japan and Korea, data for comparing Japan and the United States and Korea and the United States, and so forth. In this way, the book is a handy source of data on Japan and Korea. To demonstrate the catch-up factor in Japan and Korea, the author calculates the share of contribution made by factor inputs—capital, labor, and land—and total factor productivity to output growth. During 1953-90, the rate of output growth attributable to "Advances in Knowledge & n.e.c." was 1.59 BOOK REVIEWS277 percent per year for Japan when its GDP grew at the annual rate of 6.46 percent . The remainder, 4.87 percent per year, was thus attributable to the growth of factor inputs, improved resource allocation, the effect of weather on farming , and scale economies. For Korea, the rate of output growth attributable to "Advances in Knowledge & n.e.c." was 0.22 percent per year during the 1963-90 period when its GDP grew at the annual rate of 8.74 percent. The remainder, 8.52 percent per year, was thus attributable to the growth of factor inputs, improved resource allocation, the effect of weather on farming, and scale economies. In other words, in the case of Japan "Advances in Knowledge & n.e.c." accounted for 24.6 percent of GDP growth whereas in the case of Korea they accounted for 2.5 percent during the respective periods. If the reason for catch-up by Japan and Korea is truly their access to advanced technology , the figure for Japan appears reasonable enough but the figure for Korea seems rather small. If this figure is to be accepted, catch-up by Korea, measured in per-capita income growth, will have to be regarded more as a result of "extensive growth"—growth due to factor accumulation—than as a result of acquiring advanced knowledge...