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ECOS2025
East Asian Economies
School of Economics
Semester 2, 2023
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Unit Overview and Information
Lecturer-in-charge: David Kim
kim.david@sydney.edu.au
SSB 634
Consultation:
Friday 3 - 4pm or by appointment (in office or on Zoom)
Unit website: Lecture slides, discussion questions,
online quizzes, exam information and all
announcements will all be posted on Canvas.
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Learning Structure
 Weekly lectures (2-hours) on campus.
 Weekly tutorials (1-hour) starting in Week 1.
 Regular class participation is strongly encouraged and
monitored.
 There’ll be two guest lectures from Yonsei University
(https://www.yonsei.ac.kr/en_sc/index.jsp )
 Use Ed for peer-to-peer discussion as well as posting a
course related question. No email consultation. E-mail is
to be used only for an appointment or a short and
important message.
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Assessment structure
– Class participation: Tutorial participation (15%).
Go to your designated tutorial in Week 1.
– Online learning: Weekly online quizzes (10%).
Online quiz information is on Canvas. Online
quizzes start in Week 3.
– Midterm exam (25%): Week 8 in lecture. More
details to follow.
– Final exam (50%): Final exam period.
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Main References
No single textbook is suitable.
Lectures based on various weekly readings to be listed on Lecture slides.
Some basic references are as below (for Studwell and Perkins, electronic
access are directly available via the ‘Reading Lists’ on Canvas).
( Shuman) (Studwell) (Perkins) (Todaro)
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For a good introductory overview on East Asia
East Asia, by Robert Wade, Chapter 19, in Deepak
Nayyar (ed.), Asian Transformations: An Inquiry into the
Development of Nations, 2019, Oxford University Press.
https://academic.oup.com/book/37380/chapter/3313
73772
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Learning Objectives
 To learn the growth experiences/history in East Asia.
 To apply economic concepts and models to analyse
government policies in East Asia.
 To understand contemporary policy issues and
challenges in East Asia.
 Focus will be more on Northeast Asia than Southeast
Asia
“History teaches people to broaden their horizons. It is a safeguard
against outright idiocy.” The Economist
“He (the master-economist) must study the present in the light of the past
for the purposes of the future.” J.M. Keynes
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Caveat!!!
 This is not an economic history course, although we need
to learn from history.
 We take mainstream economic models/theories. Non-
mainstream (e.g., Marxian/institutional/post-Keynesian
heterodox) paradigms may be discussed but their
analytical frameworks will be downplayed.
 This unit aims to combine theory and data. Reasoned
theoretical arguments and empirical evidence (historical
facts) will be the main tools to deepen understanding.
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Some Misperceptions
 This unit of study is mainly about memorizing things.
No, just need to learn some history.
 This unit of study requires little understanding of
economic models. No, this is an applied economics
unit on development and policies in East Asian
context.
 This unit of study is easy to pass even without
making decent effort. Evidence suggests otherwise.
 Attendance is not important. The unit is content
heavy, and there are rewards for participation and
attendance.
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Useful economic models
Will use economic models/concepts on:
1. long-run economic growth
2. exchange rate determination
3. fiscal and monetary policy
4. international trade and commercial policy
5. asymmetric information and moral hazard
6. game theory
To be reviewed subsequently
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Economic Growth over the Millennia
0
5
10
15
20
25
30
0 1000 1500 1600 1700 1820 1870 1913 1950 1973 1998
GD
P
pe
r p
er
so
n
(U
S$
'00
0s
, 1
99
0 p
ric
es
)
World
Western
Countries
Asia (not Japan)
Africa

Source: Angus Maddison: The World Economy. A
Millennium Perspective (OECD,2001)
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GDP: East Asia vs. Western Europe

(Source: Perkins Ch 1.)
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Regional share of World GDP
East Asian growth

Source: Gill and Kharas (2007)
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Asia vs. West

(Schuman, Ch 1.)
Region Percent change
East Asia 5.6
South Asia 2.4
North America and W. Europe 2.4
Sub-Saharan Africa -0.2
E. Europe and Central Asia -1.5
World average 1.6
Average Annual Growth in GDP per capita 1965-1999.
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Some Growth Facts
 Since the Industrial Revolution, Western countries led the world
economic growth.
 World population = 1 bn in 1900 7.5 bn today
Life expectancy = 40 yrs 70 yrs
Child mortality (<1yr old) = 25% 6%
% read & write = 25% 80%
Poverty ( Global standard of living has been improving, largely due to
growth in China and India since 1980.
 The World Bank economists in the late 1980s coined the term
Newly Industrialised Economies (NIEs) for South Korea, Singapore,
Taiwan and HK, for their very rapid economic growth
performance since the 1960s.
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East Asian Growth: Key facts and questions
 Since 1960, NIEs grew at historically unprecedented rates.
 Changed the patterns of world trade and lifted millions out of
absolute poverty.
 Asian financial crisis in 1997-98 led to an abrupt halt in the
growth miracle, exposing structural weaknesses. Some
recovered quickly while others didn’t.
 China joined the group since 1978 and its continued growth
changed the global pattern of trade and investment.
 Japan stopped growing since 1990s. Why?
 South Korea showed a miracle. Will it become the next Japan?
 Can South East Asia (except Singapore) catch up with the
Northern neighbours? Why did they underperform, compared
to their Northern neighbours?
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Trade Interdependence
Regional Comprehensive Economic Partnership
RCEP
• Regional FTA
• 10 members of ASEAN,
China, Korea, Australia,
NZ and India (pulled out)
• 46% of world population
• 25% of world GDP
https://www.dfat.gov.au/trade/
agreements/not-yet-in-
force/rcep
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Free Trade Agreements (FTAs) in East Asia
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CP TPP (Comprehensive and Progressive Trans Pacific Partnership)
Source: Department of Foreign Affairs
and Trade (DFAT), 2014
http://dfat.gov.au/trade/agreements/tpp/
Pages/trans-pacific-partnership-
agreement-tpp.aspx
Original TPP derailed by Trump
Source:
http://www.thecommonsens
eshow.com/2016/05/12/tru
mps-1-campaign-issue-
declaring-how-he-will-stop-
the-tpp-in-detail/
- 11 nations (no USA)
- Effective since Dec 30 2018
- 13.4% of world GDP
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Key East Asian Economies covered
– Japan
– South Korea
– China (PRC)
– ASEAN including Singapore, Malaysia, Indonesia,
Thailand, Philippines, and Viet Nam
We want to study
– Common and country specific features.
– Growth successes and failures
– Policies and lessons
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The role of political leadership in Asia
 How important was political leadership? Why or why not?
 Asia had some of the most ‘successful’ leaders.
 Look at the data, achievements, and limitations.
 Compare with other countries or leaders.
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Korea: Park Chung-hee
(1961 – 1979)
 Known for the
‘Development dictatorship’
 Led the ‘growth miracle’ and
rapid industrialisation against all odds
 Mixed state planning with market economy
Notable national leaders
for post-war Growth
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Singapore: Lee Kuan Yew
(1959 – 1990)
 Meritocracy led economic model
 Maximised the benefits of foreign capital
 State run enterprises
 Created a political dynasty
Notable national leaders
for post-war Growth
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China: Deng Xiaoping
(1978 – 1992)
“It doesn't matter if a cat is black or
white, so long as it catches mice.”
(黃猫黑猫)
 Architect of modern Chinese
economy
 Introduced a market-based
economy into the communist
system
Notable national leaders
for post-war Growth
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All inherited a destroyed economy and/or were under colonial
rulings.
– Japan: defeated in WWII in 1945 (but never been
colonised except for a brief period of ruling by the US led
Allied Powers)
– Korea: colonial ruling by Japan (1905-45) and destroyed
by the Korean War (1950-53).
– China: Japanese occupation (1927 – 1945) and internal
war (1945 - 1948).
– Malaysia, Singapore and Indonesia: were all under the
colonial rulings of Britain or the Netherlands.
– Philippines: colonised by Spain (until 1898), and then the
US (until 1946)
– Vietnam: French colonial ruling and Vietnam War (1955 –
1975).
Poor initial conditions
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Source: http://gorhistory.com/hist111/empire.html
Imperialism: West vs East

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 A body of theory on development prominent in political
theory of development and sociology in the 1950s and
60s.
 Not a coherent set of ideas, but originated by Max Weber
and formalised at Harvard in the 1930s.
 Looks at internal mechanism and social evolution.
 Predicts that poor countries follow the same processes of
developed economies.
 Postulates economic development precedes democracy.
 Post-war Asian growth experiences debunk this theory.
Various Hypotheses of Economic Development
1. Modernisation theory
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(W.W. Rostow (1960) The Stages of Economic Growth: A Non-Communist Manifesto)
1. Traditional society
2. Pre-conditions for take-off
3. Take-off (typically 50 to 100 years to reach the mature stage, e.g. after the
industrial revolution)
4. Drive to maturity
5. Age of high mass production and consumption
Problems?
- Based on the observation of American and European economies over 19th to
20th century, so can’t explain post-war Asian growth processes
- Not all countries start with the same endowment and follow the same process.
- Stages are not easily identifiable.
Rostow’s (1960) Stages of economic growth
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 Proposed by Akamatsu (1961) as a model of dynamic
comparative advantage.
 (Akamatsu, Kaname (1961) A Theory of Unbalanced Growth in the World
Economy, Weltwirtschaftliches Archiv, 86, 196-217.)
 Aimed to explain the catching-up process of
industrialization of latecomer economies from the
following three aspects: model of the division of labour.
 Implies a regional transmission of industrialization
 Flying geese pattern of economic developments (US 
Japan  NIEs (Korea, Taiwan, Singapore and Hong
King)  ASEAN 4  …..) aimed to explain the
catching-up process of industrialization in latecomer
economies
 pro-trade oriented foreign direct investment (FDI)
mechanism
2. Flying geese (FG) hypothesis

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Flying geese (FG) hypothesis
– Intra-industry aspect: product
development within a particular
developing country, with a single
industry growing over the proesses,
i.e., import (M), production (P), and
export (E). Supply chain.
– Inter-industry aspect: sequential
appearance and development of
industries in a particular developing
country, with industries being
diversified and upgraded from
consumer goods to capital goods
and/or from simple to more
sophisticated products.
– International aspect: subsequent
relocation process of industries from
advanced to developing countries
during the latter's catching-up
process.
Source: http://www.grips.ac.jp/forum/module/prsp/FGeese.htm
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What was their main economic approach or ideology?
 American style free markets (Laissez faire) approach?
Capitalism?
 Did they follow textbook or neo-liberal economic
principles?
 Soviet style central planning (command economy)?
 Neo-Marxist or ‘dependency’ theory?
 A closed economy model with import substitution?
What do you think?
East Asia developed a unique Asian model although there are
substantial country specific variations. We will see the details
….
What Explains the ‘Asian Growth Miracle’ then?
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1) What was the main economic ideology adopted?
What is the ‘Asian Model’?
Some common features include:
 Market based approach but not quite free market
 Gov’t closely involved and directed resources. Often
picking ‘winners’ and prioritise resource allocation.
State (led) capitalism.
 Diverse groups interacted: leaders, technocrats,
entrepreneurs, foreign firms…..
 Benefitted from the global trade system with export
led growth
What Explains the Asian Growth Miracle?
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2) Did the Asian culture help?
 Confucian ethics? Why not all East Asian countries? Why not
earlier?
 Confucian culture was rather suppressive of
entrepreneurships and social changes. Neo-Confucian
political philosophy was more of an impediment to
development in China and Korea.
 Each had some country specific episodes but good policies
mattered.
3) Did global conditions matter?
 Taking advantage of global conditions (stability under the
US hegemony and the Cold war) to focus on domestic goals
 Taking advantage of the Bretton Woods system for stability
and suited export-oriented growth. Free trade paradigm
and allowing access to the US markets also helped.
What Explains the Asian Growth Miracle?
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Growth and Income Distribution
East Asia shifted the income distribution upward
while some other parts of the world moved downward!
Source: Quah, D. (2007)
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Growth and Income Distribution
Growth and distribution in an individual country:
Growth can shift the entire distribution of income in a society.
Source: Quah, D. (2007)
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GNI (PPP adjusted US$) per capita in East Asia
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Why sustained growth matters
Importance of Growth Rate
How long does it take for a variable to grow?:
The rule of 70: If a variable grows continuously at g% a
year, then it will take approximately 70/g years for the
variable to double.
Q: How often did China double its GDP?
exp g nt n tX X
⋅
+ =
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Small changes in growth rates can make a big
difference to living standards. See simulation.
US real per capita y –
actual growth (1.8% pa)
US real per capita y –
India’s growth (0.8% pa)
Source: Barro and Sala-I-Martin 2004
Importance of Growth Rate