Diversity in Economic Growth
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Diversity in Economic Growth

Global Insights and Explanations

Edited by Gary McMahon, Hadi Salehi Esfahani and Lyn Squire

Economists have long relied on cross-country regression analysis to identify the determinants of continued growth, but with only limited success. This book demonstrates the value of a different approach.
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Chapter 2: Explaining East Asian Growth: Converting Potential into Actual Growth

Peter Warr


Peter Warr East Asia’s economic success since 1970 is unprecedented in historical terms, and it is important that it be understood as well as possible. The sources of this economic performance are important for East Asia itself, but understanding it may have benefits for the rest of the world. Studying economic success promises more useful insights than studying the opposite for one basic reason – an unlimited number of ways can be found for failing at anything, but there are usually very few possible ways of succeeding. Studying individual examples of failure may only reveal the particular way a country managed to miss out on exploiting the opportunities available to it. This may not teach others how, given their own circumstances, they can avoid missing the particular opportunities which they face. Table 2.1 provides background data on East Asia’s economic growth over the three decades since 1970. Of the eight East Asian countries listed, all grew more rapidly than the average for Sub-Saharan Africa, Latin America and the Caribbean and the combined group of Eastern Europe and Central Asia (EECA). All East Asian countries except the Philippines also grew faster than the average for South Asia. Figures 2.1 and 2.2 show the implications of these high growth rates for the level of real GDP per person. Except for Vietnam, real GDP per person in 1970 is indexed at 100 in these two figures. The increase in real incomes per person in East Asia is dramatic. The 1997–98 financial crisis eroded...

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