ERI Discussion Paper Series No.57
The Conditional Convergence in East Asian Countries :
The Role of Exports for Economic Growth

October 1993
Shin-ichi Fukuda
(Hitotsubashi University, Economic Planning Agency)
Hideki Toya
(Hitotsubashi University)

(Introduction)

One of the main implications of the Solow (1956) type neoclassical growth models is a notion of "convergence" that developing countries grow faster than developed countries given the growth rates of technology and population. In particular, if countries are similar with respect to structural parameters, the neoclassical growth models predict that a country's per capita growth rate tends to be negatively related to its starting level of income per person. However, except for the evidence in OECD economies (for example, Baumol(1986)), this convergence hypothesis in neoclassical growth models seems to be inconsistent with various cross-country studies. Moreover, recent endogenous growth models, such as Romer (1986), show that without diminishing returns to capital, the growth rate of per capita product is independent of the starting level of per capita product.

The purpose of this paper is to investigate whether there is a tendency of convergence in East Asian countries (that is, Asian NIEs countries, ASEAN countries, and Japan). Our interest in the paper was originally stimulated by the observation that recent growth in East Asian countries was miraculous. The paper first presents the cross-country evidence that per capita growth rates in East Asian countries have little correlation with the starting level of per capita product even if we allow the difference in the level of human capital. The paper then stresses the role of exports for economic growth and shows that given the export-GDP ratios subsequent growth rates in East Asian countries are negatively related to the initial level of per capita GDP.

In the previous literature of development economics, a number of studies stressed a special role of exports for economic growth(for example, Balassa(1978), Krueger(1980), Feder(1982), Edwards(1992)). These studies highlighted various beneficial aspects of exports and international trade: greater capacity utilization, resource allocation according to comparative advantage, exploitation of economies of scale, technological improvements and efficient management in response to competitive pressures abroad, and so on. These studies also proposed that since there are substantial differences in productivities between export-oriented and non-export-oriented industries, countries which have adopted export-oriented policies benefit from closer-to-optimal resource allocation and higher growth (see Edwards (1989)for the survey).

However, in recent studies based on endogenous growth models, the results were mixed on the hypothesis that exports play a special role for economic development. In particular, several theoretical studies showed that the relation between international trade and economic growth was very ambiguous. 1 Even in empirical studies, the cross-country evidence showed that per capita growth rates had little correlation with the export-GDP ratios once the regression included other important variables (see, for example, Kormendi and Meguire(1985) and Levine and Renelt(1992)).2

Focusing on the economic development in East Asian countries, this paper reexamines the role of exports in economic growth models. It is shown that exports play a special role for economic development in East Asian countries. This result explains why the role of exports for economic development was ambiguous in the previous cross-sectional studies. The result is also consistent with a lot of studies which propose that the successful promotion of exports has been primarily responsible for rapid industrialization in East Asian countries (see, for example, Park (1988)).

In the previous literature, there are several related studies which focused on a unique development pattern of Asian countries based on a recent endogenous growth framework. In particular, Grier and Tullock(1989) and Helliwell(1992) showed that there was little evidence to support the convergence hypothesis in Asian countries. Our result is in marked contrast with these studies in that we support the conditional convergence hypothesis in East Asian countries. That is, once we allow a special role of exports, our empirical result supports the convergence hypothesis in East Asian countries.

The paper proceeds as follows. Section 2 presents the cross-country evidence that per capita growth rates in East Asian countries have little correlation with the starting level of per capita product. Section 3 shows that given the export-GDP ratios, subsequent growth rates in east Asian countries are negatively related to the initial level of per capita GDP. Section 4 investigates the role of government for East Asian economic development. Section 5 explores the predictability of our model for East Asian rapid economic growth in the 1980s. Section 6 mentions other important factors for East Asian economic growth. Section 7 summarizes our main results and refers to their implications.


1.While Rivera-Batiz and Romer(1991) showed the positive linkage between international trade and economic growth, several theoretical studies such as Grossman and Helpman(1991) and Yong(1991) showed that the relation between international trade and economic growth is very ambiguous(see Roubini and Sala-I-Martin(1991) for the survey).

2.Levine and Renelt(1992) showed that the ratio of exports to GDP is not robustly correlated with growth when investment is included as an explanatory variable.


Structure of the whole text

  1. full text別ウィンドウで開きます。(PDF-Format 108 KB)
  2. page1
    1. Introduction
  3. page3
    2. Weak Convergence Tendency in East Asian Countries
  4. page5
    3. Exports and Conditional Convergence in East Asian Countries
  5. page6
    4. The Role of Government
  6. page8
    5. East Asian Economic Growth in the Second Half of 1980s
  7. page10
    6. Other Important Factors
  8. page12
    7. Concluding Remarks
  9. page13
    Footnotes
  10. page14
    Tables
  11. page23
    Data Appendix
  12. page25
    References
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