Human capital, trade and public policy in rapidly growing economies: from theory to empirics, edited by Michele Boldrin, Been-Lon Chen and Ping Wang (Cheltenham: Edward Elgar, Academia Studies in Asian Economies, 2004, pp. 300 + xii)

✍ Scribed by Frederic Tournemaine

• Publisher: John Wiley and Sons
• Year: 2007
• Tongue: English
• Weight: 36 KB
• Volume: 19
• Category: Article
• ISSN: 0954-1748
• DOI: 10.1002/jid.1271

✦ Synopsis

The purpose of this book is to examine the forces underlying the long-lasting growth in newly industrialized countries in East-Asia (Hong-Kong, South Korea, Singapore and Taiwan). Theoretical and empirical studies are used to analyse different issues, such as the factors making countries continually grow whereas others experience a decline, the factors enabling an economy to grow in the long-run and to develop. Particular attention is paid to the role of human capital as a key factor of development, the role of international trade and public policy.

In addition to the introductory chapter by the editors, the book gathers together twelve contributions in the form of academic articles. It is divided in three parts each comprising four contributions. The first part focuses on human capital (Chapters 2-5), the second one focuses on international trade-related issues (Chapters 6-9), and the third discusses the effectiveness of public policy (Chapters (10-13).

The introductory chapter provides a brief review of Growth Theory, identifying the main empirical regularities and summarising the development of the theory from Ramsey to the modern growth literature of the 1990's. A survey of the literature on human capital, trade and public policy is provided. Finally, some avenues for future research are suggested. Chapter two (Eicher and Kim) develops a standard R&D-based model with horizontal innovations in which heterogeneous technologies, production costs and market shares are introduced. The analysis confirms empirical inverted-U relationships between monopoly power and innovation, and finds that increased competition benefits firms at the technological frontier, while laggard firms experience accelerated product obsolescence. Chapter three (Mino) analyses the link between long-run growth and indeterminacy in a model a `la Lucas to show that indeterminacy may arise even in the absence of increasing returns to scale. Chapter four (Lehr and Pallivos) examines the relationship between public expenditure on education and fertility. It is found that fertility is positively correlated with education spending in developing countries which contradicts the conventional wisdom. Chapter five (Chang and Chen) attempts to identify the sources of productivity growth using a sample of 70 lessdeveloped economies, concluding (perhaps unsurprisingly) that human capital contributes to productivity growth.

Chapter six (Lim and Wan) reconsiders the notion of total factor productivity, gives an alternative performance measure for economic development and relates these two measures empirically. Chapter seven (Shimomura) develops an international trade model with two countries, two tradable goods in a dynamic general equilibrium context. The main finding is that indeterminacy is possible without the need of distortions (increasing returns, market imperfections, and so on). Chapter eight (Yi Tse) develops a neoclassical growth model to evaluate three possible effects of trade restriction on aggregate output. Chapter nine (Glass) develops an endogenous growth model with a quality ladder to explore the implications of reductions in tariffs or transport costs on the rate of innovation.

Chapter ten (Chen, Chiang and Wang) develops an overlapping generation model integrating human capital and a financial sector and analyses the long-run effects of different financial policies. Chapter eleven (Ho) studies the role of public borrowing in a financial market with credit-rationing, finding a positive growth effect. Chapter twelve (Shieh, Chang and Lai) develops a two-sector endogenous growth model to analyse the relationship between government expenditures and growth. The finding is that the effects of expenditures on growth depend on the presence of a social status effect and production externality of public goods. Finally, chapter thirteen (Hung and Shaw) uses