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Economic Reform in Asia

China, India, and Japan

Sara Hsu

Economic Reform in Asia compares and analyzes the reform and development patterns of China, India, and Japan from both historical and developmental perspectives. Sara Hsu specifically focuses on China’s reform and opening-up in 1979, India’s accelerated liberalization in 1991, and the outset of the Meiji Restoration in Japan in 1878. This detailed overview of growth patterns in Asia’s largest economies is invaluable, especially in its determination to understand which development policies work, what role institutions play in development, and what issues may arise during said development.
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Sara Hsu

not until the 1960s that Japan was able to build up its road network, and the main form of transportation remained the railways. The country lacks its own energy resources and is the world’s largest importer of coal and liquefied natural gas, and the second-argest importer l of oil. Japan also has little iron ore and insufficient land on which to produce enough food for its population. Japan imports many goods, including raw materials for domestic production. Without natural resources, Japan was induced to export what it did have access to – silk and tea – and

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Sara Hsu

environmental Kuznets curve (EKC), which was coined by Grossman and Krueger (1995) in their work on economic development and pollution rates. The EKC theory describes the progressive relationship between economic development and environmental pollution. Essential to this approach is the idea that the environmental impact of a country is determined based upon what level of income it has attained (Grossman and Krueger 1995). The theory states that countries undergo three general stages of the development process in relation to their environmental repercussions. The base level

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Sara Hsu

arrangement, India agreed to reduce imports, but still non- esident r Indian (NRI) deposit outflows accelerated in the second quarter of 1991, reflecting a crisis of confidence, as mentioned above. A swathe of measures was instituted in 1991 to reform the economy, in response both to industrial stagnation beginning in 1988, and to the balance- f- ayments crisis. o p India implemented this series of reforms under the New Economic Policy to further liberalize the economy to foreign trade. The New Economic Policy focused on devaluing the rupee, increasing interest rates

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Sara Hsu

measures with enthusiasm, upgrading technology, improving managerial efficiency, and engaging in increased competition (A. Mitra 2008). India’s banking system was also reformed, removing interest rate controls, introducing capital adequacy requirements, and allowing expansion of private and foreign banks (Ahluwahlia 2002). The government continues to attempt to reduce its ownership stake in the banking system. A new bankruptcy law has also been introduced to allow creditors to enforce their claims. In 2003, a Special Economic Zones (SEZ) Act was passed to promote exports

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Sara Hsu

the unskilled labor sector is: Yn 5 wn # L n t t (6.6) where Yn and L n are output and unskilled labor, and wn is the marginal t t productivity of unskilled labor. Individuals live two periods in overlapping generations, with utility functions as follows: u 5 a log c 1 (1 2 a) log b (6.7) where c indicates consumption in the second period, b is bequest, and 0 , a , 1. Individuals vary in bequest, and not in abilities or preferences. Capital is assumed to be mobile, and the world interest rate r . 0 and constant. Borrowers can evade repayment by moving, but

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Keun Lee

- tability for a crisis- esilient growth in Korea 117 s r Examining the proposition of Taylor (1998), the capital inflows occur as the interest rate spread (∑i), and/or the capital gain spread (∑Q), opens because of lax public sector regulation, such as financial liberalization. The definitions of spreads are as follows: ∑i = i − [i* + (Δe / e)E] (I) ∑Q = (ΔQ / Q)E − [i* + (Δe / e)E] (C) where (I) is the interest spread equation and (C) is the capital gain spread equation. In the equation, i is the domestic interest rate; i* is the foreign interest rate; e is the

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Economic Catch-up and Technological Leapfrogging

The Path to Development and Macroeconomic Stability in Korea

Keun Lee

This book elaborates upon the dynamic changes to Korean firms and the economy from the perspective of catch-up theory. The central premise of the book is that a latecomer’s sustained catch-up is not possible by simply following the path of the forerunners but by creating a new path or ‘leapfrogging’. In this sense, the idea of catch-up distinguishes itself from traditional views that focus on the role of the market or the state in development.
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Keun Lee

’s given historical, economic, political, and natural conditions and the economic outcomes.1 Obviously, these factors are interrelated and influence each other. The performance of any institution, including the state, which is basically a historical product, depends upon a number of factors including the cultural setting. The acceptable scope of the activities of the state is largely determined by the expectations, which are shaped by culture and tradition, of the rulers and ruled. Markets also operate within a specific context of existing political and cultural

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Keun Lee

aid to post- risis Korea was that it tightens c monetary and fiscal policy and raises short- erm interest rates, the IMF’s t standard prescription for other economies in crisis. The high interest policy was justified as a one to stabilize the exchange rate (by inducing inflows of foreign capital) and, at the same time, to kill heavily indebted or inefficient firms in Korea. Some policy makers in the Korean government opposed this prescription, arguing that it was too harsh for the economy due to the huge adjustment costs that it would trigger. As the exchange rate