Rapid Economic Growth in East Asia

East Asia has a remarkable record of high and sustained economic growth over the past three decades. Growth in East Asia during this period has been concentrated in eight economies that have formed three waves of growth. The first wave was growth in Japan, followed by a wave of growth in the "Four Tigers" -- Hong Kong, the Republic of Korea, Singapore, and Taiwan/China. Another wave of growth is apparent in Indonesia, Malaysia, and Thailand. Since 1960 these eight economies together have grown about twice as fast as the rest of East Asia and the industrial economies, about three times as fast as Latin America and South Asia, and about five times as fast as Sub-Saharan Africa. Between 1960 and 1985, real income per capita increased more than four times in Japan and the Four Tigers and more than doubled in Indonesia, Malaysia, and Thailand.

Recent growth in the transition economies of China and Vietnam presents the latest wave of growth in East Asia. Given their economic history as state-dominated economies, these transition economies have rather different starting points than those of the East Asian economies in the previous three waves of growth. Nonetheless, their rapid growth re-enforces the importance of studying the East Asian experience for understanding the factors that promote economic growth.

The high-performance economies of East Asia have several common characteristics:

There are important interactions between these characteristics. For example, the export orientation of these economies created a demand for skilled workers that helped to support the value of investments in education. The dynamic agricultural sector allowed labor to be shifted into export industries. The rapid demographic transition improved the focus of investments in education and allowed a larger amount of savings to be invested in physical capital. Fostering beneficial interactions between growth processes in an economy is a key to development.

More generally, an important feature of the East Asia economies is the transfer of general ideas and models among countries. Japan started the process and other countries followed in what has been termed the "flying geese" effect. Successive waves copied effective institutions, policies, and technologies of previous waves of growing economies. While learning from the experience of successful economies in the region, followers changed and adapted the approaches of the leaders. For example, the first and second waves of growth in East Asia employed a considerable amount of government intervention during industrialization. In contrast, the third wave -- Indonesia, Malaysia, and Thailand -- placed much more emphasis on liberalization of the private sector. While there may not exist a single East Asian model, a central characteristic of these highly successful economies is an ability to learn from other economies' experiences.

Topic Economic Growth in East Asia