COURSE MATERIALS FOR ECON 83: ASIAN ECONOMIES, SPRING 2004


OVERVIEW OF COURSE

REQUIRED TEXTS

REFERENCE MATERIAL ON ECONOMIC DEVELOPMENT

COURSE ORGANIZATION

ASSIGNMENTS

DETERMINATION OF COURSE GRADE

INSTRUCTOR'S POLICIES

PAPER ASSIGNMENT

STUDY GUIDE FOR THE MIDTERM EXAM

MIDTERM EXAM

FINAL EXAM

OVERVIEW OF COURSE

It is impossible to survey the Asian economies in both breadth and depth in a single semester’s course -- difficult choices simply have to be made. Here they have been made on the basis of the course’s primary objective, which is to provide a solid understanding of the factors that have made the Asian region the most dynamic in the world economy. The story is best told by focusing in major part on seven East Asian economies that may together be considered to demonstrate the varied mixes of ingredients that can lead to rapid, successful economic development. These economies are also central to the story of the not so distant Asian crisis, the aftermath of which is examined in some depth in the course, both for its inherent interest and for the cautionary lessons that may be drawn from it. The choice of these countries also reflects what is readily available in the existing literature in terms of coherently structured teaching material suitable for students having only an Introductory Economics background.

The focal countries are Hong Kong (a unitary economy if not a country), Indonesia, Korea, Malaysia, Singapore, Taiwan, and Thailand. The emphasis is on understanding the logic underpinning their strategies of economic development; the issues dealt with are the “big picture” issues relating to development strategy. None of these countries will be dealt with in any real depth; rather, the concern is with the “stylized details” of their development, both in terms of policy and performance. Dealt with hardly at all are the many Asian economies which have experienced disappointing economic performance over the entire past half century. The causes of their problematic development should be apparent in general terms once the lessons of success are understood.

Exploitation of the evolving forces of globalization has been fundamentally central to the development of the successful East Asian economies. Thus it is difficult to comprehend the sources of stellar growth in the East Asian economies – including China since the early 1980s and India far more recently – without having a well informed comprehension of globalization in its many salient dimensions. Accordingly, the course also covers – to a degree that might otherwise be considered disproportionate or excessive – the elements and ingredients of globalization.

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REQUIRED TEXTS

K&W - N.D. Kristof & S. WuDunn, Thunder from the east: portrait of a rising Asia, 2000; 352 p.

EAM - World Bank, The East Asian Miracle: economic growth and public policy, 1993; 389 p.

LEW – L.E. Westphal, “Technology Strategies for Economic Development in a Fast Changing Global Economy.” Economics of Innovation and New Technology, 11 (August/October 2002), 275-320.

REA - J.E. Stiglitz & S. Yusuf, eds., Rethinking the East Asian miracle, 2001, 526 p. (not all to be read).

Japan - E.J. Lincoln, Arthritic Japan: the slow pace of economic reform, 2001, 222 p.

Dicken – P.Dicken, Global shift: reshaping the global economic map in the 21st century, 4th ed., 2003, 601 p. (not all to be read by every student; reading to be divided among students).

Note: The total cost to purchase all of the texts will undoubtedly equal or surpass about $200. Pairs or triples of students might therefore want to coordinate their text purchases to share at least one text in common.

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REFERENCE MATERIALS ON ECONOMIC DEVELOPMENT

Asian economies variously have recently been or are today developing economies. Students who have not previously studied economic development may accordingly want from time to time to consult a development textbook. Recommended are Perkins / Gillis, et al., Economics of Development, 5th ed., 2001, or Todaro, Economic Development, 7th ed., 1997. The editions indicated are the most recent editions; earlier editions will suffice. Materials shelved on the Econ. 181 Honors seminar in Economic Development shelf may also be of relevance.

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COURSE ORGANIZATION

Class periods will be devoted to a mix of lecture and discussion. As may be inferred from the determination of one’s course grade, students are expected to be well prepared, having done the week’s reading by the Thursday session. Students are wholeheartedly encouraged to use these sessions to seek clarification of anything in the week’s reading.

There will be one paper assignment, toward the end of the semester, framed around the Dicken reading and it’s application to analyze China’s approach to taking advantage of the forces of globalization.

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ASSIGNMENTS

Weeks 1 through 2:

Read all of K&W.
Discussion of chapters will be in order by pairs -- 1-6, 7-14 -- spaced over two weeks.

Weeks 3 through 5:

Read all of EAM, omit appendices except 3.1; ~293 pages; also read all of LEW paper.
Discussion of EAM chapters will be in order by parts -- 1 & 2; 3 & 4; 5 & 6 -- spaced over three weeks; LEW paper will be discussed last.

Week 6:

Week 6: read REA, ch.s by Yusuf, Ito, & Stiglitz; ~ 110 pages.
Discussion of all together.

Week 7:

Prepare for midterm.
Midterm exam.

Spring Break:

"ENJOY!"

Week 8:

Read REA, ch.s by Perkins, Okazaki, Woo-Cumings, Jomo; ~ 152 pages
Discussion of all together.

Weeks 9 & 10:

Read all of Japan book
Discussion of chapters will be in the order -- 1-4, 5-7 -- spaced over two weeks.

Week 11:

Peruse Dicken, parts I, II, and that chapter (if any) in part III dealing with the sector being covered in paper; ~315 + ~40 pages
Discussion of parts I and II
.

Week 12:

Discussion of student research in progress.

Weeks 13, 14:

Presentations by students; class discussion of Dicken, part IV

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DETERMINATION OF COURSE GRADE




Paper Assignment
Mid-term exam
Final exam
Class participation
30 percent
20
30
20

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INSTRUCTOR'S POLICIES

Examinations: Students must take exams at the duly appointed times; a make-up exam will be given only in the case of a certified (by a Dean or Worth Health Center) emergency or medical excuse for having missed an exam.

Paper Assignments: Papers must be submitted in hardcopy form. In extreme circumstances, with the instructor’s explicit prior approval, they may be submitted electronically.

Late assignments: Assignments are due at the beginning of class or at the time stated, as the case may be. Assignments turned in after the deadline will be marked down one "notch" (e.g., from A- to B+) per hour that they are late; an exception will be made only in the case of a certified (by a Dean or Worth Health Center) emergency or medical excuse.

On cheating and plagiarism: See the Student Handbook's statement regarding Academic Honesty. Cases of suspected plagiarism and cheating on exams will be reported to the Dean's Office for judicial action. In addition, the instructor has the automatic policy that any student whom he considers, on the basis of evidence available to him, to have engaged in plagiarism or cheating in any individually assigned work (i.e., in this course, exams and written reports) will automatically receive No Credit for the course.

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PAPER ASSIGNMENT

This paper assignment is structured around reading and discussing Dicken’s examination of globalization. It entails doing research on the development of some sector in China to ascertain how it is being affected by the forces of globalization and China’s responses to them. Sectors to be covered include: textiles & garments; automotive; computers & semiconductors; process industries (cement, fertilizer, integrated steel manufacturing, petroleum refining, and/or petrochemicals), financial services; and distribution. Two students will be assigned, hopefully in accord with mutual preferences, to work on each sector. Individually focused papers are the responsibility of the individual student, but it is expected that the two students working on each sector will collaborate in the research phase of the assignment, as they will be expected to collaborate on a joint presentation to the class. The assignment will commence with library instruction dealing specifically with web-linked resources that are especially relevant to the research to be done. Papers are not to exceed 2,500 words and should be formatted in Arial 10 point font.

As indicated, the purpose of this segment of the course is to learn something in greater detail about globalization and about globalization’s impact on China's industrialization. What is globalization, considered as on-going process? How does it differ across industries: in the buyer- versus producer- driven industries; what about others? What are the issues: distributive impacts, enclave biases vis-a-vis widening & deepening, indigenous control (multinational subsidiaries versus indigenously owned firms), market access (and branding), technology transfer; should governments intervene to see that full advantage is taken of globalization; are there other issues of significance? How is China's industrialization affected in particular industries? Is full advantage being taken of globalization in these industries? How is China's government seeking to insure the full benefits from globalization? Is it succeeding?

A full account of China's industrial development would have also to pay attention to other factors peculiarly relevant in China: the presence of SOEs (state owned enterprises) as well as TVEs (local government spawned town and village enterprises), and government policies toward them; the shifting balance among central / federal, provincial, and local governments; the peculiarities of Special Economic Zones and the like; the role of Overseas Chinese family business networks; WTO accession and associated constraints on government policies; and others that may be discovered. Student presentations and papers should bring such factors into the account insofar as possible and appropriate. (Dicken, p. 623, index entries for China are of some, limited use.)

Following are some of the questions pertinent to this assignment and of the kind on which research should be focused.

1. What is the nature of globalization in the industry? Shallow or deep integration; how being achieved, how demonstrated, still evolving in major ways? Etcetera.

2. Generally speaking – that is, considering the industry globally: what are the central tendencies as regards the governance structure of the industry? a) Where in the value chain does the dominant power reside with respect to market access, technology transfer (if any), selection of subcontractors, provision of working capital, access to critical inputs, etcetera? Is consequential power – with respect to each element, considered individually – distributed among agents of different kinds? b) What are the loci of institutional and technological change within the value chain? c) Where in the value chain are the rents (monopoly profits due to any and all sources of monopoly power) concentrated?

3. Are the industry-specific features of globalization identified in answer to question 1 present in the industry’s development in China? Give details to illustrate the extent they are present. If not present, why?

4. What factors have importantly motivated the key transnational players in the industry to become involved in China? E.g., global sourcing to serve multinational markets, establishing a presence in China.

5. What role(s) has globalization played in the industry’s development in China as regards market access; technology transfer; technology assimilation; development of subcontractors, suppliers; access to critical inputs, etcetera?

6. How have specific factors relating to the industry’s governance structure considered globally, identified in answer to question 2, affected the industry’s development in China? Does the industry’s governance structure as observed in its operations in China differ from its structure considered globally or as observed in its operations in some other country(ies)? If so, how and why?

7. Consider the inter-governmental agreements governing international commerce: a) How, if at all, have changes in them affected key dimensions of globalization in the industry? b) What has been their impact on LDCs’ abilities to realize development through participation in international commerce? How, if at all, has the impact in China’s case differed from that in the “average” LDC's case? E.g., more specifically, consider the consequences of the Uruguay Round, one of which was the establishment of the WTO.

8. Does the Chinese government (federal, provincial, and/or local) appear to have an explicit policy toward the industry’s development? If so: what are it’s central features; are they well aimed to maximally exploit the forces of globalization in achieving China’s development objectives? What are the deficiencies, if any, of existing policy? If there is no explicit policy, is one advisable; what should be it central elements?

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STUDY GUIDE FOR THE MIDTERM

1. Be prepared to answer, briefly!, for each element below: How did the HPAEs’ performance / achievements (from the 1960s up to the Asian crisis) differ in general terms from that / those of developing economies elsewhere in the world? What factors appear to explain the difference? How did the difference contribute, either directly or indirectly, to the HPAEs’ superior overall development performance?
Growth of GNP
Agricultural development
Population growth
Human capital formation
Wage and employment growth
Poverty and income inequality
Export growth
Savings and investment rates
Productivity growth
Macroeconomic stability
Participation in globalization
Technological development

2. For each term or concept below, be prepared briefly! to give a definition / explanation and to indicate its significance in the context of East Asia’s stellar development performance. Where relevant, be sure to distinguish between as well as discuss separately causal factors and consequences.

Contests
Cultural factors
Dynamic versus static comparative advantage
Efficiency in relation to economic development
Export-led, or export-push
Factor accumulation
Financial repression
First- versus second-tier East Asian economics
Import substitution
Initial conditions
Industrialization
Deliberation councils
Directed credit
Neoclassical versus revisionist
Performance criteria
Policy fundamentals
Pragmatic flexibility
Price distortions
Risk sharing
Selective intervention
Total factor productivity
Wealth sharing programs

3. One of the following three essay questions will appear on the exam (worth 40 out of 100 points); you may bring to the exam one 5x8 inch card (or equivalent) containing on one side (other side blank) any notes you may have prepared (with or without prior discussion of the questions with fellow students) to assist you in answering the question, whichever it may be.

a. What are the principal themes of Kristof’s and WuDunn’s Thunder from the East? What arguments do they advance in support of these themes; what evidence do they cite in support of them? Where, if at all, might it be thought that they are misguided or wrong (based on what else you’ve learned in the course to date)?

b. How does Westphal’s interpretation (in “Technology Strategies...”) of East Asia’s development performance differ from the interpretation given by The East Asian Miracle? What arguments does he make in support of his interpretation; what evidence does he cite as being corroborative? How does his view regarding the differences between the “early achievers” and the “late comers” differ, if at all, from the “miracle study’s” view?

c. To what extent are the roots of the (East) Asian Crisis found in factors that the interventionists argue were the critically important enablers (i.e., among the principal causes) of the East Asian Miracle? To what degree, and in what respects, does your answer to the foregoing question suggest that the interventionists are wrong to emphasize these factors in drawing the lessons from East Asian development experience?

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MIDTERM EXAM

Part I -- Short-answer questions.

1. (7 points per answer; spend ~4+ minutes on each; totals: 21 points; 12++ minutes)
Answer, concisely! for any three of the four elements below: How did the HPAEs' performance / achievements (from the 1960s up to the Asian crisis) differ in general terms from that / those of developing economies elsewhere in the world? What factors appear to explain the difference? How did the difference(s) contribute, either directly or indirectly, to the HPAEs' superior overall development performance?

Human capital formation
Participation in Globalization
Productivity growth
Saving and investment rates

2. (8 points per answer; spend ~5- minutes on each; totals: 40 points; 24 minutes)
For any five of the eight terms / concepts below, concisely! give a definition / explanation and indicate its significance in the context of East Asian development.

Deliberation councils Initial conditions
Directed credit Performance Criteria
Dynamic versus static comparative advantage Pragmatic Flexibility
First- versus second-tier East Asian economies Wealth Sharing Programs

Part II -- Essay, longer-answer question.

(40 points; spend ~ 24 minutes) To what extent are the roots of the (East) Asian Crisis found in factors that the interventionists argue were the critically important enablers (i.e., among the principal causes) of the East Asian Miracle? To what degree, and in what respects, does your answer to the foregoing question suggest that the interventionists are wrong to emphasize these factors in drawing the lessons from East Asian development experience?

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FINAL EXAM

You have one hour and fifteen minutes (or, 75 minutes) to take the exam. Answer questions as indicated below. If you chose to bring into the exam a 5x8 card with your notes, be sure to turn in the card when you turn in your blue books. In answering the questions, please take care to note the point values (out of 100 points in total) and notional time allotments for each part.

Note: The questions appearing below were given to the students in advance of the exam; students could bring notes individually prepared into the exam, one single-sided 5x8 card per part.

Part I - 40 points; 30 minutes..

It is by now commonplace to state that the emergence of the East Asian economies as major players in the global market owes a great deal to the globalization of economic activity that took place over the same period. But it is no less true that the post-WW2 globalization of economic activity would not have proceeded at the same pace or exhibited the same characteristics had the East Asian economies not achieved rapid economic growth over this period. Thus, the question: In what ways has East Asian development significantly contributed to the globalization of economic activity?

In answering this question, indicate each of the different ways that you consider to be valid. For each, provide a brief justification, indicating just why you think it a way in which development(s) in one or more of the East Asian economies contributed to globalization. The basis for grading your answer will be the number of valid ways given and the quality of the justification provided for each.

Part II - 40 points, 30 minutes.

Dicken argues that “relationships [italics in the original] between TNCs and states ... are, in many ways, at the very centre of the processes of global shift and of global economic transformation.” Based on the material in all of the course readings and on our discussions in class, answer the following question: What does development experience across the East Asian economies (China and Japan included) suggest are the elements of an appropriate government strategy for enlisting the involvement of TNCs in the process of economic development? In your answer be sure to consider how initial conditions and cultural as well as social and political factors affect the elements of what is appropriate.

Note: It is important to recall that Dicken defines a TNC to be “a firm that has the power to coordinate and control operations in more than one country, even if it does not own them.”

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