Working Paper: NBER ID: w23845
Authors: Randall Morck; Bernard Yeung
Abstract: Japan, an isolated, backward country in the 1860s, industrialized rapidly to become a major industrial power by the 1930s. South Korea, among the world’s poorest countries in the 1960s, joined the ranks of First World economies in little over a single generation. China now seems poised to follow a similar trajectory. All three cases highlight the importance of marginalized traditional elites, intensive early investment in education, a degree of economic openness, free markets, equity financing, early-stage coordination of firms in diverse industries via arrangements such as business groups, and political institutions capable of curbing the power of families grown wealthy in early-stage rapid development to make way for prosperity sustained by efficient resource allocation to high-productivity firms.
Keywords: No keywords provided
JEL Codes: G00; N25; N35; O10; O16; O53; P1; P11; P5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Modern institutions established in Japan (O43) | Economic growth in Japan (O49) |
| Dismantling of traditional elites in South Korea (L22) | Economic growth in South Korea (O00) |
| Establishment of a developmental state in South Korea (O25) | Economic growth in South Korea (O00) |
| Institutional reforms in China (O17) | Economic growth in China (O49) |
| Marginalized traditional elites and early investment in education (I24) | Overcoming coordination problems in low-income countries (F35) |
| Institutional changes in financial systems (G21) | Efficient capital allocation (G31) |