The ‘paradoxes’ of the successful state

Abstract

Three issues are discussed in this paper. First, I argue that it is impossible to understand the East Asian growth miracle without appreciating the importtant role that government policy played in stimulating private investment. Second, I will summarize some of my work on the determinants of policy effectiveness, based on a cross-country comparison of export subsidy regimes, and show that the usual rules of thumb on what makes for good policy (uniformity, transparency, non-selectivity, etc.) are quite useless in predicting which policy regimes perform better in practice. Third, I will provide some evidence that the government's social insurance role creates a complementarity between states and markets. These three sets of ideas yield a more balanced and nuanced view of the role of the state in economic development than has recently become commonplace.