1. Economics of Catch-up: country, industry and firm levels
Keun Lee 李根
Prof. of Economics, Seoul Nat’l University
Director, Center for Economic Catch-up
Committee for Dev’t Policy, UN-ECOSOC  

2. What is catch-up? cf) catch up, forging ahead, and falling behind (Abramovitz 1986) 1) national level: per capita income , market share in world, Global Fortune ) firm-level: productivity, market share, sales growth => rise and decline of nations

3. usa China Korea 세계60조; 60억인; 일인 만$; 미국,유럽 15조, 중,일5조, 한,인 1조
* IMF, World Economic Outlook database, April, 2009
* Estimates start after 2008
* World : composed of 173 countries
* Euro Area: composed of 16 countries
세계60조; 60억인; 일인 만$; 미국,유럽 15조, 중,일5조, 한,인 1조

4. China * IMF, World Economic Outlook database, April, 2009
* Estimates start after 2008
* World : composed of 173 countries
* Euro Area: composed of 16 countries

5. Thinking on Econ. Development
1st Generation: capital stock and that investment for fixed asset is most important
2nd: (Open door) Policies matter
-> Washington Consensus
3rd: Institutions matters
-> post-Washington Consensus
=> Debates: Human capital; Institution; location;
WC is dead: Binding constraints (Rodrik)
BeST (Beijing-Seoul-Tokyo) Consensus
Barcelona Consensus: Stiglitz

6. 1st Question: Recent Debates on Long Run Economic Growth
Institution vs. Policies vs. Geography
1) Not policies but Institutions matter:
Reversal of fortunes by colonizers
(Acemoglu, Johnson & Robinson 2001, 2002; Rodrik et al 2004)
Institution as a savior of the Washington Consensus
2) Geography matter: A destiny? ( J. Sachs)
3) Does institution matter? -> Human capital
( Glaeser, La Porta, Lopez-de-Silanes & Shleifer, 2004)

7. Competing Paradigms Washington Consensus, East Asian Consensus Beijing Consensus 북경共識 (Dragon) BeST Consensus Hindu Model (Elephant)

8. Washington Consensus vs. East Asian Consensus
A. Elements of Consensus
South Korea
Taiwan
China
A1. Macroeconomic Stabilization
1. Fiscal Discipline
Yes, generally
Yes
2. Pub. Expenditure to Health, Edu, Infra
3. Tax Reform, broadening the Tax Base
Yes since 1994
4. Unified & Competitive Exchange Rates
Yes, except early time
Yes, since 1994
5. Secure Property Rights
Yes, except early prd.
Mixed
A2. Privatization, Deregulation and Liberalization
6. Deregulation
Limited
7. Trade Liberalization
Limited until the 80's
Limited until 2002
8. Privatization
many SOEs in 50, 60s
Many SOEs in 50, 60s
No, still SOEs dominant
9. Elimination of Barriers to FDI
Heavily restricted
subject to control
some sector restricted
10. Financial Liberalization
B. Missing Elements from the Washington Consensus
11. Export Promotion + Tariffs
Yes, very strong
yes, very strong
12. Technology Policy for Upgrading
Yes, since 1970
Yes, since the 1980s
priority since 90s
13. Higher Education Revolution
Yes, since the mid 1990s

9. Acemoglu and Robinson,
Why Nations Fail
Bill Gates’ book review “Never explain how to move to more “inclusive” institutions” Keun Lee Inclusive vs. extractive : -> relevant more in low income or pre-modern economy b/c less difference among middle income countries => Why Nations Fail at Middle Income Stage: Inclusive vs. Innovative systems

10. constraints on executives)
Quality of Institutions
constraints on executives)
1965
1980
2000
Korea 3 1 6
Taiwan 2
Philippines 5
Thailand 7
Malaysia 4
China
India
Brazil
Argentina
Chile
Mexico
Source: Polity IV Dataset; from Lee and Kim 2009 table 1

12. Record of Catching-up / Falling behind:
As % of the US per capita Income ( in 2005 Constant PPP)

13. Trend of the Income Levels as Percentage of that of Japan:
=> Korea, Taiwan: No catching up in 60s, 70s:-> only from 1980s

14. Middle- and Low-income Traps: connected

15. Middle income country trap: Per capita in 2000 Dollars, 1980-95
Income Groups
1980
1995
Annual growth
High Income
14985
20593
2.14
Lower Middle Income
958
1,280
1.95
Upper Middle Income
5001
4616
-0.53
Asian 4: Korea, Taiwan, Hong Kong, and Singapore
1980
1995
7041.5

16. Flat R&D/GDP as source of MIT (middle income trap)

17. Lee, Keun & B. Kim (2009, World Development)
Confirms importance of Innovation and high education
for middle and higher income countries;
cf) Institution and basic human capital matter
for low and lower middle C’s
This book beyond just patent counts (innovation measure)
=> more details of the NIS (national innovation systems)
Eg) cycle time of tech.
localization of knowledge creation,

18. Cambridge Univ. Press 2013
Schumpeterian Analysis of Economic Catch-up: Knowledge, Path-creation, & the Middle Income Trap
Keun Lee 李根
Prof. of Economics, Seoul Nat’l University
Director, Center for Economic Catch-up
Committee for Dev’t Policy, UN-ECOSOC  

19. Analysis at 3 levels
Country: What determines catching-up growth:
-> per capita income growth->NIS
Sector: Why easy to catch up in some sectors;
why not in others ? => SSI
-> Country’s US Patent share in sectors
3) Which the CIS (corporate innovation system) a good fit for catching up;
sales growth, profitability, firm value, productivity
? Business groups, an inferior or effective forms for catch up growth
=> different question > same answers = knowledge variables

20. Broadly, Schumpeterian Perspective: National Innovation systems
Lundvall (1992): defines NIS = elements and relationships 1) which interact in the production, diffusion and use of knowledge 2) rooted inside the borders of a nation state.’ It is about efficiency in acquisition, creation, diffusion, and utilization of knowledge. -> The differences in NIS determines different levels of competitiveness of nations.

21. Malerba’s SSI (sectoral systems of innovation
Knowledge &
Technologies
Networks among actors
Actors 1:
Firms
Demand &
Market Regimes
Actors 2:
Gov’t, GRIs
Institutions
IPRs, financial systems

22. Example Question: Sectoral difference in catch-up Answer:
Example Question: Sectoral difference in catch-up Answer: . (Sectoral Systems of Innovation; Technological Regimes of Sectors) Lee & Lim (2001, Research Policy) Park and Lee (2006: Industrial & Corporate Change) Jung and Lee (2010: Industrial & corp. change)

23. TFP Catch-up : Korea vs Japan
Rapid catch-up
(about 30%)
Sustain Gap
(about 10%)
Source: Jung and Lee (2010: Industrial & corp. change) 23

24. Convergence of Productivity in IT: korea vs Japan
Sam. Elect.:
OVER
While Industry : JUST 24

25. “Still Gap in Autors: Hyundai vs. Toyota
H.M. : Under
like industry 25

26. References (www.keunlee.com)
Lee, Keun, & BY Kim,”Both Institutions & Policies matter but differently at differnent income levels: long run economic growth,: World Development (2009)
Lee, Keun, & C. Lim (2001), “Technological Regimes, Catching-up & Leapfrogging: the Findings from the Korean Industries”, Research Policy,
Lee, Keun, Chaisung Lim, and Wichin Song (2005), "Digital Technology as a Window of Opportunity and Technological Leapfrogging: Catch-up in Digital TV by the Korean Firms”, Inter.J. of Tech. Management, Vol. 29, 1/2, pp
Lee, Keun, “Making a technological Catchup.” Asian J.of Tech. Innovation, 2005.
Mu, Qing, and Keun Lee (2005), “Knowledge Diffusion, Market Segmentation and Technological Catch-up: The Case of Telecommunication Industry in China”, Research Policy.
Park, K., and Keun Lee (2006), “Linking the Technological Regime to Technological Catch-up: An Empirical Analysis Using the US Patent Data,” Industrial and Corporate Change, July 2006
Jung, M & K. Lee, (2010), “Sectoral systems of Innovation and Productivity Catch-up: between the Korean and Japanese firms,” Industrial & Corporate Change.

27. Thank you!
ありがとう!
Gracias!
Meu Amigo! Obrigado!
謝謝大家
Danke Shon
감사합니다