East Asian Economic Development

(Provisional, subject to change)

Summer 2008 Professor Chung H. Lee9:00 – 10:40 a.m. MTWTh Office: Woodang #504531 LP-POSCO Building Office Hours: To be determined

This course is designed for students who would like to learn about economic development in East Asia in the past forty-some years, the emergence of China and its effect on the region, growing regional economic interdependence, and the possibility of forming a free trade area in East Asian. It is assumed that the students enrolled in this course have taken at least the introductory courses in economics and are familiar with the basic concepts and theories about markets and the market economy.

Attendance requirementsStudents are required to attend all classes and read all assigned readings prior to class. The instructor will frequently assign students to make presentations in class on various topics and selected readings. “Students must fulfill 48 classroom hours during the six week terms to obtain academic credit at KU.”

Course gradeGrades are based on attendance and class participation (20%), presentation (30%), and a term paper (50%).

Term paperStudents are required to form groups of two (or three in exceptional cases) to work on a joint term paper and consult with the instructor in choosing their paper topics. (Please see the section on possible topics.) A one-page outline of a proposed topic must be submitted by Monday of the second week of instruction. A five-page review of the literature is due by Thursday of the third week and the 15-page (typed, double spaced, excluding endnotes, bibliography, and graphs and tables) term paper is due at the ISC Office by Tuesday of the sixth week of instruction. Plagiarism is absolutely prohibited: the information, data, and/or ideas that are obtained from other sources for use in the paper must be cited and referred to in the paper. The term paper should identify the question to be addressed, discuss its relevance to the purpose of the course, critically evaluate the answers extant in the literature, and offer the answer of choice with reasons for the choice.

Topics and Readings

1. Introduction Overview of the course Economic development East Asian experience in economic development Lessons from the East Asian experience

Washington consensus

Rodrik, Dani. 2004. “Rethinking Growth Policies in the Developing World,” http://ksghome.harvard.edu/~drodrik/Luca_d_Agliano_Lecture_Oct_2004.pdf

World Bank Report 2002 –“Building Institutions for Markets—Overview” available at www.worldbank/org/wdr/2001/fulltext/fulltext2002.htm

Stiglitz, Joseph. 2004. “The Post-Washington Consensus Consensus,” http://www2.gsb.columbia.edu/faculty/jstiglitz/download/2004_Post_Washington_Consensus.pdf

[To access commonly used websites on the Asia-Pacific economies, go to http://home.earthlink.net/~harstadm/econhome1.htm. For country statistics go to, e.g., www.adb.org/Statistics/default.asp ]

2. East Asian economic development: the orthodox view

How has East Asia achieve rapid economic development? A market-friendly approach

World Bank, The East Asian Miracle: Economic Growth and Public Policy, World Bank, 1993, 8-26

World Bank, “The Republic of Korea: four decades of equitable growth,” World Bank Working Paper no. 30781, May 2004 (Available at World Bank Documents and Reports) Young, Alwyn, “Lessons from the East Asian NICs: A contrarian view,” NBER Working Paper no. 4482 http://www.papers.nber.org/papers/w4482.pdf

Mulder, Nanno and Onodera, Osamu, “Trade Liberalization and Economic Performance: Latin America v. East Asia 1970-2006,” OECD Trade Policy Working Papers No.70, 2008 http://ideas.repec.org/s/oec/traaab.html

3. Role of the state in East Asian economic development: heterodox views Role of state in economic development Industrial policy Trade and development Financial system and economic development

Rodrik, Dani, “Getting Interventions Right: How South Korea and Taiwan Grew Rich,” Economic Policy 20, 1995 (See also a discussion on his book, One Economics, Many Recipes: Globalization, Institutions, and Economic Growth, at http://imf.org/external/np/tr/2007/tr071129a.htm

2

Lee, Chung H., “The Government, Financial System, and Large Private Enterprises in the Economic Development of South Korea,” World Development, Vol.20, No.2, 1992

____________, “The State and Institutions in East Asian Economic Development: The Past and the Future,” Journal of the Korean Economy, Vol.3, No.1, spring 2002, Available at as “State and Institutions in East Asia,” http://www2.hawaii.edu/~lchung

Lawrence, Robert Z. and Weinstein, David E., “Trade and growth: import-led or export-led? Evidence from Japan and Korea,” NBER Working Paper no. 7264, July 1999 (pp.1-10 and 18-22) http://www.nber.org/papers/w7264.pdf

Chang, Ha-Joon, “The East Asian Development Experience” in Ha-Joon Chang (ed.), Rethinking Development Economics, Anthem Press, London, 2003

Amsden, Alice, Asia’s next giant: South Korea and late industrialization, Oxford University Press, 1989

Wade, Robert, Governing the market: economic theory and the role of government in East Asian industrialization, Princeton University Press, 1990

Frankel, Jeffrey and Romer, David, “Trade and Growth in East Asian Countries: Cause or effect,” NBER Working Paper No.5372. www.nber.org/papers/w5372.pdf

[Presentation of term paper: work in progress]

4. Emergence of China and its impact on East Asia Economic reform in China: Big Bang v. Gradualist approach

--Dual-track system (TVEs and SOEs) --Free-market prices at the margin

Trade and economic development Regional production networks Comparative advantage and structural adjustment Foreign direct investment and trade

Naughton, Barry, The Chinese Economy: Transitions and Growth, MIT Press, 2007, 85-111, 139-159, 377-99

Fogel, Robert W., “Capitalism and democracy in 2040: forecasts and speculation,” NBER Working Paper no. 13184, June 2007 www.nber.org/papers/w13184.pdf

Eichengreen, B., Y. Rhee and H. Tong, “The impact of China on the exports of other Asian countries,” NBER Working Paper No.10768, 2004 http://www.nber.org/papers/w10768

3

Kim, Joon-Kyung, Y. Kim, and Chung H. Lee, “Trade, Investment and Economic Interdependence between South Korea and China,” Asian Economic Journal, Vol.20, No.4, 2006 (Available at http://www2.hawaii.edu/~lchung)

Lee, Chung H., “Economic Development in China and Its Implications for Japan” (with Shigeyuki Abe) in M. Blomström, B. Gangnes, and S. LaCroix (eds.), Japan’s New Economy: Continuity and Change in the Twenty-First Century, Oxford University Press, 2001. (Available at http://www2.hawaii.edu/~lchung) Zebregs, Harm, “Intraregional trade in emerging Asia,” IMF policy discussion paper, PDP/04/01, April 2004 www.imf.org/external/pubs/ft/pdp/2004/pdp01.pdf

Mercereau, Benoit, “FDI flows to Asia: did the dragon crowd out the tigers?” IMF working paper, WP/05/189 www.imf.org/external/pubs/ft/wp/2005/wp05189.pdf Athukorala, P-c, “The rise of China and East Asian export performance: Is the crowding-out fear warranted,” (Available as “China and East Asian Trade” at http://www2.hawaii.edu/~lchung)

5. Economic integration and regional free trade area in East Asia

Trade, investment and economic integration Production networks, international fragmentation of production processes Free trade area: trade creation v. trade diversion

Ng, F. and Yeats, A., “Major trade trends in East Asia: What are their implications for regional cooperation and growth,” World Bank Policy Paper, WPS3084, 2003 (available at the World Bank webpage)

Gaulier, G., et al, “China’s integration in East Asia: production sharing, FDI and high-tech trade,” CEOU Working Paper, Paris, 2005 www.cepii.fr/anglaisgraph/workpap/wp05-09.pdf

Ando, M. and Kimura, F., “Foundation of international production and distribution networks in East Asia,” NBER Working Paper 10167, 2003 http://www.nber.org/papers/w10167

Urata, Shujiro, “Toward Northeast Asian Production Networks” in Yoon Hyung Kim and Change Jae Lee (eds), Strengthening Economic Cooperation in Northeast Asia, Korea Institute for International Economic Policy, Seoul, 2004

Lee, Chang Jae, “Rationale for institutionalizing Northeast Asian economic cooperation and some possible options,” Schott and Goodrich, “Reflections on economic integration in Northeast Asia,” Langhammer, “Rationale for enhancing Northeast Asian economic cooperation and some possible options” in Yoon Hyung Kim and Change Jae Lee (eds),

4

Strengthening Economic Cooperation in Northeast Asia, Korea Institute for International Economic Policy, 2004. “Comments” on these papers by Chung H. Lee in the same volume

Lee, Chung H., “Intra-Regional Trade in Northeast Asia: Trends and Characteristics” (with Yangseon Kim) in Y. Kim and C. J. Lee (eds), Northeast Asian Economic Integration: Prospects for a Northeast Asian FTA, Korea Institute for International Economic Policy, Seoul, 2003. (Available at http://www2.hawaii.edu/~lchung)

Fung, K.C. and Iizaka, Hitomi, “Japanese trade and direct investment links with Korea and China” in Joon-kyung Kim and Chang Jae Lee (eds), Enhancing Investment Cooperation in Northeast Asia, Korea Institute for International Economic Policy, Seoul, 2004

De Grauwe, P. and Zhang, Z., “Introduction: Monetary and Economic Integration in the East Asian Region,” World Economy, Vol. 29, Issue 12 (Available as East Asia Integration at http://www2.hawaii.edu/~lchung)

Ahn, Sanghoon, K. Fukao, and K. Ito, “Outsourcing in East Asia and its impact on the Japanese and Korean labour markets,” OECD Trade Policy Working Papers #65 http://ideas.repec.org/s/oec/traaab.html

6. Asian financial crisis and institutional reform Finance and economic development Financial liberalization International capital movements Crisis and its causes Post-crisis institutional reform

Lee, Chung H., “Introduction: issues and findings” in C. H. Lee (ed.), Financial Liberalization and the Economic Crisis in Asia, Routledge, London, 2003. (Available at http://www2.hawaii.edu/~lchung)

Barro, Robert J., “Economic growth in East Asia before and after the financial crisis,” NBER Working Paper no.8330, June 2001 www.nber.org/papers/w8330.pdf

Lee, Chung H., “Chaebol, Financial Liberalization, and Economic Crisis: Transformation of Quasi-Internal Organization in Korea” (with Keun Lee and Kangkook Lee), Asian Economic Journal, Vol.16, No.1, 2002, 17-35. (Available at http://www2.hawaii.edu/~lchung)

Park, Yung-chul, “10 Years after the Financial Crisis: What has Korea Learned and Where Is It Headed?” Korea Focus, Vol.15, No.3, July 2007, 126-137 http://koreafocus.or.kr/essays/list.asp?volume_id=638category=G

5

[Term paper presentation]

7. Globalization in the East Asian economies Does globalization require institutional changes in East Asia?

Park, Yung Chul; Ahn, Choon Yong; and Wang, Yunjong, “In Search of a New East Asian Development Paradigm: Governance, Markets and Institutions” in J. J. Teunissen and A. Akkerman (eds), Diversity in Development – Reconsidering the Washington Consensus, FONDAD, The Hague, December 2004, 150-166 http://www.fondad.org/product_books/pdf_download/3/Fondad-Diversity-BookComplete.pdf

Lee, Chung H., “Institutional reform in Japan and Korea: why the difference?” in M. Blomström and S. La Croix (eds), Institutional Reforms in Japan, Routledge, London, 2006. (Available at http://www2.hawaii.edu/~lchung)

Lee, Chung H., “Financial Reform, Institutional Interdependency, and Supervisory Failure in the Post-Crisis Korea” (with Hong-Bum Kim), Journal of East Asian Studies, V.6, No.3, September-December 2006, 409-431. (Available at http://www2.hawaii.edu/~lchung)

8. Impact of “Asian Drivers” on the Developing World How has economic growth in China impacted the developing countries and how

will it?

Kaplinsky, R. and Messner, D., “Introduction: The Impact of Asian Drivers on the Developing World,” World Development, V. 36, No.2, 197-209 (Available at http://www2.hawaii.edu/~lchung)

[See other articles in the same issue of World Development for their impact on different parts of the developing world.]

Possible paper topics East Asian model of economic development—institutional foundations for East

Asian economic development Emergence of China and/or India and its effect on its neighboring economies—

resource-rich, developing economies v. industrialized countries Economic relationship between Japan and South Korea Production networks and intra-regional trade in East Asia Intraregional foreign direct investment and economic integration in the region

6

Free trade area in East Asia? Causes and consequences of the Asian financial crisis Sustaining economic growth in East Asia Economic relations between China and Japan Does the growth of EA intraregional trade depend on the growth of China’s trade

with the rest of the world?

7