Demographic- Economic- Ins2tu2onal Dynamics in East Asian Countries: Flying Geese Paradigm Ver 2.0 Masahiko Aoki. Stanford University

Transcription

1 Demographic- Economic- Ins2tu2onal Dynamics in East Asian Countries: Flying Geese Paradigm Ver 2.0 Masahiko Aoki Stanford University

2 The theme of my talk Present a simple frame for understanding East Asian development (China, Korea, Japan) in terms of demographic- economic- insdtudonal co- dynamics; that captures commonality, differences, and linkages in these countries.

3 GDP comparison (2009, IMF) Nominal (Billion US$) PPP Ranking by PPP Per capita (PPP) China 4,985 9, ,778 Japan 5,068 4, ,554 Korea 832 1, ,938 Taiwan ,776 Hong Kong ,653 Singapore ,180 East Asia, total 11,655 15, US 14,119 14, ,934 Canada 1,336 1, ,947 Mexico 875 1, ,609 NAFTA 16,330 17, EU 16,415 14,

4 Resurgence of East Asia (Maddison: 1990 InternaDonal $) China (32.9%) Japan 20.7 (2.9%) Korea 5.6 (0.8%) East Asia (36.6%) W. Europe (23.8%) US 12.6 (1.8%) World Total (100.0%) Per capita/ (4.6%) (3.1%) 17.8 (0.3%) (7.9%) 1,396.1 (26.1%) 1,455.9 (27.2%) 5,337 (100.0%) 6,188.0 (15.1%) 2,699.2 (6.5%) (1.8%) (23.6%) 7,857.4 (19.2%) 8,430.7 (20.6%) 40,913 (100.0%) 4,803 21,218 15,732 19,912 29,037 6,516

5 Japan, China, Korea (GDP/PPP) by Maddison (1990 Geary- Khamis $) 1990-million M G-K 5,000, G-K 25,000 4,500,000 4,000,000 20,000 3,500,000 3,000,000 15,000 2,500,000 2,000,000 10,000 1,500,000 1,000,000 5, , China (GDP) Japan (GDP) Korea(GDP) China (Per Capita GDP):RHS Japan (Per Capita GDP):RHS Korea (Per capita GDP): RHS

6 QuesDons and premises Making of a powerful economic zone in East Asia? Are there linkages to make East Asian economies more integrated? Will China dominate the region by its sheer size? It is said that East Asia is different from EU in its diversity in the stage of economic development, vigor, polidcal insdtudon, culture, and so on. At the same Dme there are common features as well (what are they?) GDP size of a country is important in terms of its impact on global markets, capacity to provide public goods (including defense), etc. But we focus on per capita GDP as a proxy of economic welfare (cf. Kuznets. How about externalides, social development index, etc.?)

7 Development Path: Japan- China- Korea (%) α = agricultural employment y = per capita income PPP 2008 U$$

8 Demographic Patterns: Active and Child Populations 80.0 (%) Demographic Paderns (AcDve Japan (UN prospects) and Child PopulaDon Korea (UN prospects) China (UN prospects) Korea China Japan aged 0-14 (Japan) aged (Japan) aged 0-14 (China) aged (China) aged 0-14(Korea) aged 15-64(Korea)

9 Dynamic mechanism behind accoundng idendty: y L/N P MS [ αδ] L / N Labor participation αδ S Agriculture L Labor productivity Fertility/ mortality y Investment in K and HK, TFP Institutional factors

10 A simple accoundng IdenDty involving migradon and demographic change Y = GDP N = PopulaDon E = Total Employment Y i = Output of the i- th sector, i= A (primary), MS (second & terdary) E i = Employment of the i- th sector, i = A, MS Y = Y A + Y MS, E = E A + E MS so that y = Y/N = E/N[E A /E x Y A /E A + E MS /E x Y ΜS /E ΜS ] = E/N x Y ΜS /Ε ΜS [ 1 αδ] where α = Ε Α /Ε and Δ = [E MS E A ]/ E MS. Let [ 1 αδ] = S, which measures impacts of structural factors, the employment share of A- sector α and producdvity differendal between the MS- sector and A- sector Δ, on per capita income y. Then, the rates of growth g(.) of various variables sadsfy the following reladon: g(y) = [g(e) g(n)] + g(y ΜS /Ε Μs ) + g(s) = [g(e) g(n)] + g(tfp ΜS ) + θ MS [g(k MS ) g(ε Μs ) ] + g(s) where K MS = input of capital service in the MS- sector and θ MS = capital share in the MS- sector.

11 Sources of per capita income growth Japan Korea China

12 EvoluDonary padern of East Asian development Phase 0: Dominant peasant economy. Phase I: IniAal IndustrializaAon through taxadon on agricultural surplus, but with limited labor mobility from agriculture. Phase II: high growth with increasing industrial labor inputs (demographic dividends and rapid migradon) (α => 0.2) Phase III: stable per capita income growth through autonomous industrial producdvity improvement. Phase IV: populadon maturity (aging and low ferdlity)

13 Flying geese paradigm Ver 2. Wild geese fly in a "V" formadon. An once popular analogy was that the development in East Asia was pulled by the lead goose (Japan) who flies forward from one stage of technological development to the next, while followers are aligned successively behind front runners. (Akamatsu, 1930). Such analogy can not be appropriate any more. Lead goose is ge{ng older and flying toward the unknown territory (the mature populadon). But this flight would be followed by Korea and China before not too long. There are thus sdll commonality and linkages among developmental dynamics of East Asian economies, complemented by respecdve, path- dependent insdtudonal trajectories. Thus, Flying Geese Paradigm Ver.2.0. Each phase has its own agenda, which includes solving problems accumulated in the previous phase or modifying soludons therein. Then, there can be mutual gains in the following sense: the ability of each economy to respond to strategically its own developmental agenda may be enhanced by the ability of others in a different phase and vice versa (strategic complementarides). The V formadon is aero- dynamically efficient!

14 Challenges in the transidons In the transidon to Phase III, Realize condnued improvement in labor producdvity w/o massive populadon dividends/migradon (cf. Lewisian turning point?) With this as resource, respond to the external costs of growth accumulated in Phase II (e.g., energy/environment, urban congesdon, rural- urban disparity, the lack of universal endtlements) In the transidon to Phase IV, Concentrate on niche markets, while globally diversifying manufacturing basis Decline on the ferdlity rate is inevitable? ( Babies come back by insdtudonal innovadon). Re- design endtlements (generadonal polidcal issue) DeregulaDon/facilitaDon of internadonal flows of human, goods, informadon and knowledge (TPP, immigradon). To meet these challenges, corresponding polidcal and social mechanisms need to evolve. Are Japan, China and Korea up to this?

15 Strategic complementarides So, China, Japan and Korea have to compete with each independently in order to solve their own nadonal social- economic agenda? We may broaden the neoclassical nodon of the gains from trade based on comparadve advantages in resource endowments. There may be aspects of Edgeworth- type complementariaes in internadonal economic reladons due to differences in the phase of demographic- economic dynamics: Between two nadonal economies, each economy may be able to reciprocate what the other needs in coping with its own nadonal agenda more effecdvely. F.Y. Edgeworth

16 IniDal condidons for insdtudonal evoludon Family- managed, peasant farming dominated economies before nadonal industrializadon in Japan, Korea and China. This is the point emphasized by H.Oshima, Yujiro Hayuami, Philip Huang and others as characterisdcs of monsoon agriculture. No plantadon. (0.5~2ha) On this common ecological basis, different social norms, corporadons (organizadons), and polidcal power structure evolved to enforce taxadon and land- leasing contracts between peasants and landlords, as well as among farmers, which would have impacts on subsequent insdtudonal trajectories in these economies (path- dependence). The rural origin theory? InsDtuDons (endogenous rules of the game. Not just laws) co- evolve with demographic- economic dynamics.

17 Thank you for listening! Comments and suggesdons are welcome.