Unravelling the Pacific Paradox
The performance of the Pacific Island countries (PICs) over the past two decades has been characterized by economic growth rates that are low on average yet extremely volatile. This has been so despite favorable levels of natural and human resources, high levels of public investment and aid, and reasonably prudent economic management – a phenomenon that has been labeled the “Pacific Paradox”. Questions may be posed therefore as to what accounts for this poor performance of the PICs, especially when countries elsewhere of the same size and characteristics have registered impressive growth performance during the same period? Although the inherent structural constraints characterizing the PIC economies have a direct impact on the performance of these economies, one cannot dismiss the more fundamental constraints imposed by the institutional environment in which these countries operate. The purpose of this study was to critically review the economic performance of the PICs with a view to evaluating the possible explanations for the “Pacific Paradox”. The proposition evaluated is that it is not the lack of capital or good policies that constrains the economic growth and development of these island economies, but rather the lack of appropriate institutions and incentives to accumulate and acquire human and physical capital and to make policies effective. Early tests of this proposition across several Pacific island countries indicate that ineffective institutions, leading to contract insecurity, as well as corrupt practices and bureaucratic ineffectiveness account for large reductions in the average rate of growth of national income in these countries. Unless the PICs undertake appropriate institution-building measures with a view to putting in place the conditions necessary for broad-based, sustained economic growth, these island economies will continue to live out the “Pacific Paradox”.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601|
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: https://crawford.anu.edu.au/research/papers/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brunetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1998.
"Credibility of Rules and Economic Growth: Evidence from a Worldwide Survey of the Private Sector,"
World Bank Economic Review,
World Bank Group, vol. 12(3), pages 353-84, September.
- Brunnetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1997. "Credibility of rules and economic growth : evidence from a worldwide survey of the private sector," Policy Research Working Paper Series 1760, The World Bank.
- Levine, Ross & Renelt, David, 1991.
"A sensitivity analysis of cross-country growth regressions,"
Policy Research Working Paper Series
609, The World Bank.
- Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-14, May.
- Joel S. Hellman & Geraint Jones & Daniel Kaufmann & Mark Schankerman, 2003.
"Measuring Governance, Corruption and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies,"
Development and Comp Systems
- Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel & Schankerman, Mark, 2000. "Measuring governance, corruption, and State capture - how firms and bureaucrats shape the business environment in transition economies," Policy Research Working Paper Series 2312, The World Bank.
- Jayaraman, T-K, 1996. "Private Investment and Macroeconomic Environment in the South Pacific Island Countries : A Cross-Country Analysis," Papers 14, Asian Development Bank.
- Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
- Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
- Johnson, Simon & Kaufmann, Daniel & Zoido-Lobatón, Pablo, 1998. "Corruption, public finances and the unofficial economy," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34372, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant H, 1997. "Civil Liberties, Democracy, and the Performance of Government Projects," World Bank Economic Review, World Bank Group, vol. 11(2), pages 219-42, May.
- Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1999. "Corruption, public finances, and the unofficial economy," Policy Research Working Paper Series 2169, The World Bank.
- Duncan, Ronald C., 1968. "Factor Analysis, A Farm Management Research Tool," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 36(01), March.
- Vito Tanzi & Hamid Reza Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
- Vito Tanzi & Hamid Reza Davoodi, 2000. "Corruption, Growth, and Public Finances," IMF Working Papers 00/182, International Monetary Fund.
- Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
- Clague, Christopher, et al, 1999. "Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance," Journal of Economic Growth, Springer, vol. 4(2), pages 185-211, June.
- Easterly, William & Kraay, Aart, 1999. "Small states, small problems?," Policy Research Working Paper Series 2139, The World Bank.
- Helene Poirson Ward, 1998. "Economic Security, Private Investment, and Growth in Developing Countries," IMF Working Papers 98/4, International Monetary Fund.
- Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
- Carlos Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth," IMF Working Papers 99/85, International Monetary Fund.
- Edgardo Campos, J. & Lien, Donald & Pradhan, Sanjay, 1999. "The Impact of Corruption on Investment: Predictability Matters," World Development, Elsevier, vol. 27(6), pages 1059-1067, June.
- Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
- Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
- Goel, Rajeev K & Nelson, Michael A, 1998. "Corruption and Government Size: A Disaggregated Analysis," Public Choice, Springer, vol. 97(1-2), pages 107-20, October.
- International Monetary Fund, 1998. "The Quality of Governance; â€œSecond-Generationâ€ Civil Service Reform in Africa," IMF Working Papers 98/164, International Monetary Fund.
- Jiahua Che & Yingyi Qian, 1998. "Insecure Property Rights and Government Ownership of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 467-496.
- Pritchett, Lant, 1996. "Mind your P's and Q's : the cost of public investment is not the value of public capital," Policy Research Working Paper Series 1660, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:idc:wpaper:idec02-2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tom Kompas)
If references are entirely missing, you can add them using this form.