The “hidden” side of the “flying-geese” catch-up model: Japan’s dirigiste institutional setup and a deepening financial morass

Akamatsu’s original “flying geese” (FG) growth model is often used as a frame of reference for both further conceptual elaborations and empirical explorations. So far, only the positive results of FG development have been focused on and emphasized in connection with Asia’s phenomenal growth in the precrisis period. The Japanese economy, supposedly Asia’s lead goose, is in the eleventh consecutive year of stagnation. How has such a once successful lead goose come to be stricken by financial woes? This paper points out that Japan’s once miraculous FG growth was made possible because it established an effective dirigiste catch-up regime in the early postwar period but that Japan’s present financial predicament is paradoxically a path-dependent outcome of this FG strategy. The institutional, especially financial, dimension of FG strategy needs to be taken into account to explain why such a strategy once proved effective but later culminated in a deepening financial morass. The FG model should encompass not only the industrial dimension of catch-up but also its institutional, particularly financial, dimension.     

Exchange-rate volatility, trade and “fixing for life” in Thailand

At the outset of the 1997 financial crisis, the quest to find a more suitable exchange-rate policy has become an urgent task facing the East Asian economies. One of the key policies agreed under Thailand’s August 1997 Letter of Intent (LOI) with the IMF was the adoption of a more flexible exchange-rate policy. However, the country re-adopted its pre-1997 crisis rigid exchange-rate policy in early 1999. To grasp this “fixing for your life” phenomenon, we test the impact of the exchange-rate volatilities of Thailand’s baht against the yen and the US dollar on the performance of the country’s bilateral trades with the two key partners.     

From New Order to Regional Autonomy: Shifting Dynamics of “Illegal” Logging in Kalimantan, Indonesia

In recent years there has been a tendency to view the seemingly irremediable spread of “illegal” logging in Indonesia in isolation, or as a result of disassociated and premeditated criminal acts. This paper proposes a different view of the problem by discussing the changing dynamics of the “illegal” logging sector in the two districts of Berau, East Kalimantan and Kotawaringin Timur, Central Kalimantan. It suggests that “illegal” logging is not a simple case of criminality, but a complex economic and political system involving multiple stakeholders. Furthermore, “illegal” logging is not a stationary condition that can be effectively dealt with through coercive or repressive measures alone. Rather, it should be viewed as a dynamic and changing system deeply engrained in the realities of rural life in Indonesia. Regional autonomy has also created a supportive environment for the “illegal” logging trade and allowed it to gain resilience.     

The meaning of “social safety nets”

In Southeast Asia, the issue of “social safety nets” (SSNs) has emerged more prominently since the financial crisis. Despite the increased interest in social safety nets, there is still considerable confusion among scholars and national and international organizations regarding the use and meaning of the term. This article considers the different definitions of the term—particularly as it was used during the Asian Financial Crisis—and to attempt to clarify its meaning and proper use.The safety net analogy is drawn from high-wire walkers who are protected by a safety net if they fall. The safety net prevents any walker who falls—unexpectedly or not—from hitting the floor and incurring catastrophic injuries. Following this line of reasoning, it is not surprising to learn that some organizations and scholars use the term SSN such that it encompasses private and public mechanisms that assist individuals in maintaining a minimum level of consumption.The term “social safety net” (SSN) began to be used by Bretton Woods’ institutions in connection with structural adjustment programs related to their lending programs. Developing countries introduced SSNs to mitigate the social impact of structural adjustment measures on specific low-income groups. They were initially formulated to serve three objectives: poverty alleviation, to make adjustment programs more politically acceptable, and institutional reform. During the Asian Financial Crisis, there was a great deal of confusion regarding the content and consequent identification of SSN programs.Public SSN programs can be classified into formal and informal safety nets. Formal and informal safety nets are, generally, distinguished by law enforcement: formal safety nets are those which legally guarantee individuals access to economic or social support whereas informal safety nets provide likelihood of support to individuals to assure them of attaining or remaining above the designated minimum standard of living but with no legal guarantee.Informal SSNs can be divided into private and public ones. Examples of private informal SSNs include transfers from family members, friends, neighbors and community members and institutions, including NGOs, while those of public informal SSNs refer to the support which individuals can hope for from the government, through programs which generate assets or employment, transfer income, or provide basic social services, as a means of helping affected individuals from falling below the designated minimum standard of living. The difference between formal and informal public SSNs is whether there exists a formal legal support of the assistance.The article has provided more discussion on the definitions of SSN used by the World Bank, ESCAP, ILO and TDRI.In conclusion, the authors note that the tremendous variation in the use of the term invites confusion and makes it virtually useless as a technical concept. The very nature of the metaphor invokes a vision of a large net that encompass a number of different types of programs. In many cases it is not even possible to list specific programs that are included, as the particular forms of these programs could, of course, vary with place, time and circumstances. Complicating things further, the term is sometimes used in a very narrow sense. Given the low probability that usage of the term will ever be standardized, economists and national/international organizations might be well served by avoiding the term completely and instead using its component parts.     

Struggling with Sustainability—A Comparative Framework for Evaluating Sustainable Development Programs

“Sustainability” is an inherently dynamic, indefinite and contested concept. “Sustainable development” must, therefore, be seen as an unending process—defined not by fixed goals or the specific means of achieving them, but by an approach to creating change through continuous learning and adaptation. How, then, do we evaluate a development program’s contribution to such a process? This paper constructs a framework for evaluating sustainable rural development programs using both process- and outcome-oriented criteria, and demonstrates its application. The SANREM CRSP/SEA research and development program in The Philippines—including ICRAFs efforts to organize communities around agroforestry and environmental conservation—is assessed.     

Outsourcing the State? Public–Private Partnerships and Information Technologies in India

This paper examines public–private partnerships (PPPs) for development through the example of telecenters in two Indian states. How might a developmental state position itself with respect to civil society under a PPP model of service delivery? We find that each state’s political economy is reflected in its PPP strategy, but that in both states the emerging middle classes rather than the poor benefit most from ongoing telecenter projects. Outsourcing development services to private entities need not “privatize” the state but does alter the way in which citizens “see” the state. Service delivery through telecenters becomes a symbol of government efficiency and responsiveness.     

Who will Meet China’s Import Demand for Forest Products?

Via computable general equilibrium modeling we find that as a result of economic growth, Yuan appreciation, and logging restrictions in China, China’s imports and exports of forest products would dramatically increase, and China’s imports would have displacement effects as timber-exporting countries would increase their exports to China while reducing their shipments to other countries. Such displacement effects would make pressure on forests in supplying countries less than they otherwise might be. Global economic growth is a dominant driving force for China’s imports. Russia, Southeast Asia, and Africa would remain major foreign suppliers of logs to China, while supply sources for Chinese imported lumber and paper products would be relatively diverse.     

European Union integration lessons for ASEAN + 3: the importance of contextual specificity

This paper will argue that EU integration appears to offer ASEAN and three Northeast Asian Countries (China, Japan and South Korea) political and security lessons concerning maintenance of regional stability, as well as some economic lessons. There is not, however, any institutional blueprint for integration that these countries could emulate. This is in part because economies are characterized by “contextual specificity” of chosen institutions and their corresponding working rules. These institutions and rules evolve in particular cultural and historical settings and are shaped by the specific country’s philosophical basis, political structure, and attitudes of authorities towards alternative types of economic institutions and the types of corresponding rules they could choose to establish for those institutions.     

Neo-Corporatism and Territorial Economic Development: The Ecuadorian Indigenous Movement in Local Government

This article argues that the democratization of local governments that has been led by indigenous movements in Ecuador can best be described as “neocorporatist”. The article, based on the evidence from two cases of indigenous local governments in the Andes, argues that the forms of “neo-corporatism” created by the Ecuadorian indigenous movement on its entry into government are designed as participatory institutional frameworks that also serve as channels for the expression of social movements’ demands. The neocorporatist practices deployed by indigenous movements in these areas have had mixed results, both in terms of their implementation and of their capacity to foster viable income-generating activities for poor rural areas. On balance, while the forms of neocorporatist government fostered by the indigenous movement can have positive impacts on economic development, there are still two broad limitations. First, it continues to be difficult to foster a process of territorial economic development that effectively addresses the distinct interests that exist among different community organizations. Second, the negative effects of the wider economic context in which local territories find themselves remain beyond the control of the local government.     

The “North-South” controversy and Britain's regional problems

The extent of regional economic disparities in Britain has recently become the focus of considerable controversy. Attempts have been made to portray the existing situation in terms of a “North-South divide” or as “two nations”. Opponents of this point of view have argued that no such stark division of the country exists, and that prosperous areas can be found in parts of the North just as depressed areas can be found in parts of the South.

This paper considers the pattern of regional disparities which now prevails in Britain. Section I is a detailed presentation of the existing situation. Section II considers the question of how sharp a division there now is between different parts of Britain, followed, in Section III, by a discussion of the process of change which has brought about the regional disparities which we now observe. Implications for government policy are then considered.     

Deposit drains on “interest-paying” banks before financial crises

This paper conducts an econometric test of Diamond and Dybvig’s [Diamond, D., Dybvig, P., 1983. Bank runs, deposit insurance, and liquidity. Journal of Political Economy 91, 401–420] theory of bank runs as interpreted by Chari [Chari, V.V., 1989. Banking without deposit insurance or banks panics: lessons from a model of the U.S. national banking system. Federal Reserve Bank of Minneapolis Quarterly Review 13, 3–19] and Calomiris and Gorton [Calomiris, C., Gorton, G., 1991. Origins of banking panics: models, facts, and bank regulation. In: Hubbard, R.G. (Ed.), Financial Markets and Financial Crises. NBER and Univ. Chicago press, Chicago, pp. 109–173]. We test whether or not seasonal deposit drains on New York banks coincide with the bank panics of 1873 and 1893 in the United States. We use individual bank level data to illuminate the reason for withdrawals. The evidence reveals that the panic of 1873 could have included a seasonal interior drain. A seasonal interpretation of Diamond and Dybvig’s model cannot be applied to the bank panic of 1893.     

“Imaginary” or “Real” Moneys of Account in Medieval Europe? An Econometric Analysis of the Basle Pound, 1365–1429

During the Middle Ages, the medium of exchange function of money was separate from the unit of account function. This has given rise to the misconception that the medieval pound was an “abstract” or “imaginary” unit of account whose purchasing power was independent of that of gold and silver coins. The joint behavior of the pound price of gold, the pound price of silver, and the silver–gold ratio in Basle between 1365 and 1429 cannot be reconciled with the notion that nominal values were autonomous. Instead, the monetary system was based on a silver standard, supplemented by gold coins whose money of account values were determined by this silver standard.     

Europe and East Asia in the context of regionalization: Theory and economic policy

Much academic interest has recently centered on economic regionalism as a framework of international economic relations. The European Community (EC) has been a focal point. Other regional economic organizations (APEC, NAFTA), have been subjects of debate.This paper discusses three principal arguments: (1) the “natural”/“optimal” regional grouping, (2) transaction cost advantage in a regional model, and (3) the balancing of intraregional and extra-regional economies. Indeed, the argument is most certainly for an international regime of an “open,” not a “fortress” economic regionalism.This paper examines the subject relative to economic theory and policy.     

Understanding China's Economic Growth from a Regional Policy Perspective

There has been ongoing interest in China's economic growth. What were the drivers of China's economic growth in past years? What policies were used to promote China's economic growth? Although different lenses may be used to understand and explain China's economic growth, this paper draws on historical, theoretical, and empirical perspectives to discuss the nexus between China's regional policies and economic growth. First, we review the evolution of China's regional policy and the policy's changing emphasis in different development stages, from balanced, unbalanced, and coordinated development to synergistic development. Then we construct a theoretical model to illustrate the impact of regional policy on the local economy and conduct an empirical examination with a case study of regional policy using regression discontinuity design. This paper analyzes the concept of regional policy and the underpinning logic of economic growth and presents practical approaches to formulate a better regional policy framework.     

Trade and growth: The Nigerian experience

This paper analyses the impact of trade on Nigeria's economic growth. Using a two-gap model, it estimates the relationships between exports, foreign capital and economic growth. The paper also provides an assessment of the relative influence of Nigeria's two main types of export (agricultural produce and petroleum) on economic growth. The results of the analysis provide empirical support for the hypothesis that trade has been an important engine of growth in Nigeria. The paper recommends, as part of Nigeria's strategy for achieving rapid economic development, the vigorous pursuit of an export promotion policy.     

Mass democracy: The real reason that Brazil ended inflation?

“Populism” and expanded democratic participation often have been painted as the enemy of sane macroeconomics. Yet Brazil’s experience suggests possibly benign implications of stable mass democracy for national economic management in developing countries. Prior to 1930, agrarian elites ruled Brazil. As political participation gradually expanded, policymakers elaborated the regulatory framework of import-substituting industrialization (ISI). ISI not only generated strong growth but also chronically high and volatile inflation, with costs falling most heavily on the disenfranchised a poor majority. The advent of mass democracy in the mid-1980s gave the poor a political voice for the first time, and plausibly was the crucial cause for the demise of hyperinflation a decade later.     

Explaining the spread of residential air conditioning, 1955–1980

In 1955 fewer than 2% of the nation’s residences had air conditioning; by 1980 over half were air conditioned, and over a quarter had central air. This paper attempts to explain the growth and the geographic differences in the prevalence of residential air conditioning from the mid fifties to 1980. Census data and data on climate and relevant prices are combined to estimate a model that focuses on the role of economic factors, that is, geographic differences and changes over time in incomes and prices, in affecting the pattern of diffusion of residential air conditioning.     

The roots of today's “women's jobs” and “men's jobs”: Using the index of dissimilarity to measure occupational segregation by gender

Looked at broadly, occupational distributions by sex in the United States have changed remarkably little since 1900; accordingly, researchers have found a slow rate of decline in the index of dissimilarity (a measure of occupational segregation by gender), estimates of which have so far been confined to the 20th century. This paper analyzes trends in the index over the latter part of the 19th century. The results indicate that during this period, industrialization and the associated changes in the nature of the business enterprise resulted in a rapid declinne in occupational segregation by gender, as measured by the index. This decline occurs earliest in cities experiencing early industrialization. Index estimates are presented for the United States and for selected midwestern cities, and changes in the index are decomposed into occupational mix effects and sex composition effects. Occupation-specific index changes are used to identify which occupations influenced changes in the overall index. The results indicate that the dynamic occupational shifts of the 19th century set the stage for the “men's jobs” and “women's jobs” that have been so persistently stable in the 20th century.     

Patterns of industrialization and the flying geese model: the case of electronics in East Asia

We use the “flying geese” framework to study the change in the geography of comparative advantages in the electronics sector in East Asia, China and the USA. Doubts have been raised about the capacity of the “flying geese” model to interpret the most recent phases of Asian development, in particular as far as progress in the electronics sector is concerned. This paper takes issue against these negative conclusions on both theoretical and empirical grounds. On the theoretical side, the paper takes up the formulation proposed by Kaname Akamatsu, arguing that some of the critical observations raised against the model look to a distorted and simplified version of Akamatsu's original theory. Analyzing the behavior of the “revealed comparative advantage index” per products and area, it is concluded that the “flying geese model” is compatible with manifold industrial development models, increasing interdependence in an integrated area which crucially also includes the US, and that asymmetries and hierarchical order persist across the countries.