Friday, March 26, 2010

Development Paradigms: Flying Geese Edition

The IMF blog is discussing a theory of development contagion developed in Japan in the early part of the last century based on the flight patterns of geese.
According to Akamatsu, the lead goose in the formation, was Japan. The second tier consisted of newly industrialized economies—South Korea, Taiwan Province of China, Singapore, and Hong Kong SAR. Following hot on their tails were the ASEAN countries, such as Indonesia, Malaysia, the Philippines and Thailand. More recent additions to the flock are China and India

As the “lead goose” lost its comparative advantage, it would shift further away from labor-intensive production to more capital intensive activities. Meanwhile, those labor intensive activities would move to nations further down the hierarchy. To take a simple example, the textile industry was abandoned in Japan as labor costs rose, but also, at a later stage, by countries in the second tier, South Korean and Taiwan.

According to this model, as each goose ahead in the formation trades and invests with neighboring countries, those latter countries, in their turn take off to become the next growth driver.

Who is ready to be goosed? Potentially Cambodia, Laos, and Nepal

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