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The "Hidden" Side of the "Flying-Geese" Model of Catch-Up Growth: Japan's Dirigiste Institutional Setup and a Deepening Financial Morass

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  • Terutomo Ozawa

    (Economics, Colorado State University)

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    Abstract

    Japan is in the eleventh year of stagnation with a prolonged financial malaise. Just a little over a decade ago, Japan's Phenomenal growth was admired and even feared as a juggernaut. Japanese scholars and policymakers came to often describe Japan's industrial advance in terms of the so-called "flying-geese" model of catch-up growth, a sanguine expression that has also been played up in the media. Japan once did play the role of Asia's lead goose before the burst of the 1987-1990 asset bubble. The model is useful in capturing the essence of Japan's successful industrial upgrading and Asia's trade-led growth but fails to explain why such a success would ever lead to the present economic predicament. This is because it ignores the institutional, especially financial, underpinnings of Japan's catch-up strategy. What were the key enabling institutional features of Japan's once effective FG catch-up strategy? How did they function? Why did they come to cause the 1987-1990 bubble and the current financial imbroglio? How will Japan be "reformed"? All these developments and issues need to be examined as path-dependent evolutionary events within a reformulated "flying-geese" model, and "institutional" model of FG catch-up.

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    Bibliographic Info

    Paper provided by East-West Center, Economics Study Area in its series Economics Study Area Working Papers with number 20.

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    Length: 30 pages
    Date of creation: May 2001
    Date of revision:
    Handle: RePEc:ewc:wpaper:wp20

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