Summary of Endogenous Growth Theories applied to ‘East Asian Miracles’

1. About K 1) High Saving Rates High saving rates lead to rapid capital accumulation, which in turn lead to a rapid expansion of production facilities. Still the investment needs may exceed the domestic savings. Then foreign investment is important.

2) High Productivity of Capital: Low ICOR

2. About L Growing population Younger population Long hours of works Disciplined workers

3. About Human Capital Education and Quality of Labour They increased the skilled labor force by providing universal primary schooling and better primary and secondary education.

4. High Social Capital : Harmony, Order, and Stability HPAEs stabilized their economies with sound development policies that led to fast growth. 1) Equitable(Not Equal) Income Distribution: In economics theory, it is true that the higher the income level, the smaller the average savings ratio (savings divided by income). Thus some may think that the equitable income distribution promote consumption, not savings. However, it is the matter of the degree in income inequality. Most of developing countries have extreme levels of income inequality. The HPAE were committed to sharing the new prosperity by making income distribution more equitable. This is important in two aspects: First, motivation al point- gross income inequality may lead to lack of motivation on the part of labor or low income class, and to a lack of Social Capital. The result could be a violent social unrest which hinders economic development. The example is Philippine. Second, their public policies promoted rapid capital accumulation by making banks more reliable and encouraging high levels of domestic savings.

2) Harmonious Relationship between Workers and Employers 3) Harmonious Relationship between Government and Business Cooperation between governments and private enterprises was fostered.

5. About Government: Active and Effective Economic Role of Government 1)Economic Planning -Micro Level as well as Macro Level - Indicative Planning as well as Fine Tuning

2) Export Oriented Economy Import Substitution versus Export Promotion(Orientation) Trade in manufactured exports was promoted by government- established marketing institutions. Analysts disagree about the effectiveness of such interventions, but agree that without the foundation of macroeconomic stability and development of human and physical capital, the expansion would not have been so dramatic and sustainable. This report reviews the basic development policies of HPAEs that created macroeconomic stability. It explains why most countries should not use government interventions in today's changing global economy.

3) Industrial Policies Strategic Industry Plan Government traffic-controlling Resource Allocation Fostering Infant Industry

4) Macroeconomic Economic Policies Legal and regulatory structures created a positive business environment. Beyond the fundamentals of accepted macroeconomic management, HPAEs adopted policies at variance with the notion of the "level playing field" of open market free enterprise.

6. About a Broad Sense of Institution’ Instead of a specific institution we may look at the Foundation for Human Capital, Social Captial, and Government - “Neo-Confucianism”