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Explaining Miracles: Growth Regressions Meet the Gang of Four

In: Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4

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  • William Easterly

Abstract

The authorexamines a range of cross-sectional variation in performance and policies for evidence on what distinguishes successes from failures. At about 6 percent, the growth rate of the Four Tigers - Hong Kong, the Republic of Korea, Singapore, and Taiwan (China) - are among the largest outliners in any study of growth. This is not surprising, says the author. The Four Tigers are Tigers because their growth rate was high. The Four generally have large positive residuals in growth regressions, but the author argues that this is not surprising for observations that were known in advance to be at the top of the sample. But growth regressions and, more generally, quantitative measures of"policies"are not very successful at picking out the Gang of Four as"most likely to succeed."Most observers before the"miracle"were pessimistic about East Asia. The Four are not nearly as superlative in policies and other country characteristics as they are in per capita growth rates. Large positive residuals such as those associated with the Four's high performance have historically been transitory. The stratospheric trajectory of the Four should be heading back toward earth soon, says the author. What may be unusual about the Four's success is that they were all in one region. At least casually, the Asian successes look a lot like growth radiating from poles, with Japan followed by the Gang of Four, followed by China, Thailand, Malaysia, and Indonesia. The great success of the Gang of Four does not imply a blanket endorsement of all their policies - they may have made mistakes that were more than offset by other good policies and, probably at least in part, by good luck. It is disturbing how large and transitory the unexplained element is in economic success. Perhaps the best way to think about good policies is that they make success likely sooner or later. When all is said and done, the story of the East Asian successes is consistent with the prosaic fun

(This abstract was borrowed from another version of this item.)

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This chapter was published in:

  • Takatoshi Ito & Anne O. Krueger, 1995. "Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4," NBER Books, National Bureau of Economic Research, Inc, number ito_95-2, Ekim.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8553.

    Handle: RePEc:nbr:nberch:8553

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    1. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
    2. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
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    5. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    6. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(6), pages 1126-52, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    7. Wontack Hong, 1993. "Export-Oriented Growth and Equity in Korea," NBER Chapters, in: Trade and Protectionism, NBER-EASE Volume 2, pages 413-436 National Bureau of Economic Research, Inc.
    8. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
    10. Michael Bruno, 1993. "Inflation and Growth in an Integrated Approach," NBER Working Papers 4422, National Bureau of Economic Research, Inc.
    11. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, Econometric Society, vol. 61(2), pages 251-72, March.
    12. Collins, Susan M, 1990. "Lessons from Korean Economic Growth," American Economic Review, American Economic Association, vol. 80(2), pages 104-07, May.
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    Cited by:
    1. Feenstra, Robert C. & Madani, Dorsati & Yang, Tzu-Han & Liang, Chi-Yuan, 1999. "Testing endogenous growth in South Korea and Taiwan," Journal of Development Economics, Elsevier, vol. 60(2), pages 317-341, December.
    2. James B. Ang & Jakob B. Madsen, 2010. "Can Second-Generation Endogenous Growth Models Explain The Productivity Trends And Knowledge Production In The Asian Miracle Economies?," CAMA Working Papers 2010-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Lee Kian Lim & Michael McAleer, 2003. "Convergence and Catching Up in ASEAN: A Comparative Analysis," CIRJE F-Series CIRJE-F-218, CIRJE, Faculty of Economics, University of Tokyo.
    4. Cunado, J. & Gil-Alana, L. A. & Perez de Gracia, F., 2004. "Real convergence in Taiwan: a fractionally integrated approach," Journal of Asian Economics, Elsevier, vol. 15(3), pages 529-547, June.
    5. Birdsall, Nancy & Rhee, Changyong, 1993. "Does results and development (R&D) contribute to economic growth in developing countries?," Policy Research Working Paper Series 1221, The World Bank.
    6. Areendam Chanda, 2002. "The Influence of Capital Controls on Long Run Growth: Where and How Much?," International Finance, EconWPA 0201001, EconWPA.
    7. J. Cunado & L.A. Gil-Alana & F. Pérez de Gracia,, 2007. "Real convergence in some emerging countries: a fractionally integrated approach," Recherches économiques de Louvain, De Boeck Université, De Boeck Université, vol. 73(3), pages 293-310.
    8. Leung, H. M. & Tan, Swee Liang & Yang, Zhen Lin, 2004. "What has luck got to do with economic development? An interpretation of resurgent Asia's growth experience," Journal of Policy Modeling, Elsevier, vol. 26(3), pages 373-385, April.
    9. Lee Kian Lim, 2000. "Convergence and Catching Up in South-East Asia: A Comparative Analysis," Econometric Society World Congress 2000 Contributed Papers 1844, Econometric Society.

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