Department of Economics
Carl Mosk
University of Victoria
Economics 428, Fall 2010-2011
Economic Development of the Pacific Rim [14854]
Course Outline and Reading List
[I]
Introduction
This is a course in the post-World War II economic development of the region of the
globe that enjoys Pacific Ocean coastlines. Excluded from coverage in this course are three
countries that are dealt with in Economics 327 (Economic History of North America), namely the
United States, Canada and Mexico. Topics to be covered in the course include income growth
and convergence; the demographic transition and the impact of population growth on income per
capita growth; welfare, human development and the biological standard of living; the domestic
dimension of the political economy of growth (import substitution, export promotion, the
Japanese Model of Economic Development and the Miracle Growth Economies of the AsiaPacific; staple centered economic development and the terms of trade; multilateral and regional
trade agreements and the International Economic Order.
Countries and/or regions of the globe touched on in this class include: China, Japan,
Taiwan (China), South Korea, Malaysia, Indonesia, and the Philippines; Australia and New
Zealand (Australasia); Central America; and Columbia, Ecuador, Peru and Chile in South
America.
My office hours are 11:30 am to 12:20 pm on Tuesdays and Fridays. My office is 378
Business and Economics Building, on the third floor. I will meet students outside of these hours
but only by appointment (please see me at the end of lecture for an appointment.) Because I find
to answer questions via e-mail, I discourage students from making enquiries or asking
informational questions through e-mail. Moreover, I do not guarantee that I will respond to email.
A copy of this course outline is available on my personal homepage. The homepage
address is: http://web.uvic.ca/~mosk/mosk-hp.html.
[II]
Administrative Matters
It should be stressed that performance in this course depends upon your ability to read
and write. For this reason, it is strongly recommended that you complete Economics 225
(Writing for Economists) before you enroll in this course.
Grading is based upon numerical scores on a midterm and on a final. The midterm score
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is weighted by .4, and the final score is weighted by .6, the two scores added together to yield a
total numerical score out of 100.
There will be two midterms, the first scheduled for Tuesday, October 5 and the second
for Tuesday, November 2. The numerical score for the semester’s midterm performance will be
obtained by calculating the higher numerical score from the midterm scores (if you only take one
midterm that is the score that will be used for your midterm score).
The examinations will consist of (1) identification answers and/or answers to factual
questions (largely drawn from the reading in the textbook); and (2) essay questions (heavily
drawn from the lectures.)
In assigning letter grades I employ the schedule for the Department of Economics,
namely:
90 and up:
75-79:
60-64:
0-49:
A+
B+
C+
E or F
85-89: A
70-74: B
55-59: C
80-84: A65-69: B50-54: D
Students are expected to take examinations at the scheduled time and places. The only exceptions
are for authorized medical excuses.
Students should make note of the following policy adopted by the Department of Economics:
Plagiarism and Cheating: The standards and reputation of a University are the shared
responsibility of its faculty and students. Students are expected to observe the same
standards of scholarly integrity as their academic and professional counterparts.
Plagiarism and cheating are considered to be serious breach of academic integrity and
shall be dealt with as such by the Department of Economics.
Please see the University Calendar for examples of plagiarism.
Students should also be aware of the following University policy:
The University of Victoria is committed to promoting, providing and protecting a positive
and safe learning and working environment for all its members.
Students are advised not to make travel plans until after the examination timetable has been
finalized. Students who wish to finalize their travel plans at an earlier date should book flights
that depart after the examination period (see the University Calendar.) There will be no special
accommodation if travel plans conflict with the examination.
Graduate students enrolled in the class are expected to write a paper in addition to taking
the scheduled examinations. They should consult with me during the first several weeks of class
regarding the topic, content and length of the paper.
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[III]
Course Outline and List of Readings
The textbooks for this course are (1)Gerald M. Meier and James E. Rauch, Leading
Issues in Economic Development. [Eighth Edition] (New York: Oxford University Press, 2005)
and (2) Carl Mosk, Japanese Economic Development: Markets, Norms, Structures (New York:
Routledge, 2008).
The Meier and Rauch book consists of excerpts from publications authored by various
experts in economic development, commentary on the excerpts, and tables. Some of the material
in the reading is highly technical (e.g.: making use of econometrics or mathematical logic.)
Students are not expected to master this technical material. Rather, they are expected to grasp the
essential points made in each reading. They are also expected to come away with an appreciation
of the differences of opinion within the community of development economics.
A
Measuring Economic Development
We begin our study of economic development with a discussion of three methods for
calibrating development that are used in the field: utilizing measures of income per capita,
utilizing the human development index (HDI), and utilizing various indicators of the biological
standard of living (BSL).
Readings
In the Meier and Rauch volume:
Appendix – How To Read a Regression Table [pp. 633-638]
Overview (Introduction) [pp. 2-4]
Exhibit 1.A.1 – The Human Development Index
Exhibit I.A.2 – Human Development Index Rankings Compared to US Dollar Per Capita
GDP Rankings
Note I.A.1 – The Evolution of Measures of Development
Selection I.A.1 – Why Are Services Cheaper in the Poor Countries?
Comment I.A.1 – The Productivity and Factor Proportions Explanations Again
Exhibit I.A.4 – Basic Data
Comment I.A.2 – Capabilities and Entitlements
Selection I.B.2 – How Reform Worked in China
Selection I.B.4 – The Impact of Economic Reforms in Latin America and the Caribbean
Note I.C.1 – Evolution of Development Economics
Comment I.C.2 – Development Economics as a Special Subject
Overview (Historical Perspectives): The Division of the World [pp. 81-83]
Selection II.1 – The Spread of Economic Growth to the Third World
Selection II.6 – Divergence, Big Time
Comment II.4 – Will the Poor Countries Catch Up?
In the Mosk volume:
Chapter 1 (including appendix to the chapter) and Appendix (pp. 353-370).
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A.1
Income per Capita: Levels and Growth
In discussing income per capita, we will deal with the index number problem (i.e.: the use
of Paasche, Laspeyres and chained indices; purchasing power parity and Geary-Khamis
international dollar deflation) and we will examine long-run trends in economic development.
A.2
The Human Development Index
We examine the human development index and consider long-run trends in the index for
a selected group of countries.
A.3
The Biological Standard of Living
A third approach pioneered by economists interested in the interaction of biological and
economic conditions involves employing anthropometric measures (e.g.: height, weight, chest
girth, etc.) to capture the standard of living of populations. We consider trends in some of these
measures for a variety of nations.
B
Agriculture
This portion of the lectures focus on a variety of issues concerning settled agriculture and
its relationship to hunting and gathering, surplus labor in the countryside, the importance of an
agricultural surplus for successful industrial development, institutional features of the
agricultural sector, and technological change in farming.
Readings
In the Meier and Rauch volume:
Overview (Agriculture) [ pp. 381-383]
Exhibit VII.A.1 – Agricultural Labor Force and Productivity
Selection VII.A.1 – Agriculture, Climate, and Technology
Selection VI.B.1 – Economic Development with Unlimited Supplies of Labor
Selection II.2 – The Division of the World and the Factoral Terms of Trade
Note II.1 – Why Not Export First?
Note II.2 – The Lewis Model of the World Economy
Selection II.3 – Agricultural Productivity, Comparative Advantage, and Economic
Growth
Selection II.4 – Income Distribution, Market Size, and Industrialization
Selection II.5 – Factor Endowments, Inequality, and Paths of Development Among New
World Economies
Selection VII.A.5 – Prospects and Strategies for Land Reform
Selection VII.B.1 – The New Development Economics
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Selection VII.B.3 – The New Institutional Economics and Development Theory
Selection VII.B.4 - Rural Credit Markets and Institutions in Developing Countries
Note VII.A.2 – Induced Technical and Institutional Change
In the Mosk volume:
Chapters 2-3.
B.1
Ecological Issues
How important are ecological constraints (e.g.: climate, soil quality, the stock of
indigenous wild animals, etc.) for the development of settled agriculture out of hunting and
gathering, and for the productivity of settled agriculture?
B.2
Surplus Labor
Does labor surplus exist? What are its implications? We develop the Fei-Ranis version of
the Lewis surplus labor model and explore the empirical nature of surplus labor focusing on the
changing structure of farm households.
B.3
The Importance of an Agricultural Surplus
Why is important that the agricultural sector generate a surplus? Is simultaneous
expansion of agricultural productivity and industrial productivity possible or is reaching a
relatively high level of agricultural productivity a prerequisite for industrial expansion?
B.4
Institutional Issues
Is farm tenancy a barrier to development of agriculture? How is the existence of
sharecropping related to information issues? What are the ingredients of successful land reform?
B.5
Technological Change
Does factor supply condition the evolution of technological change in agriculture?
C
Urbanization and Non-Agricultural Employment
In this section of the lectures we discuss the nature of urbanization in the developing
world and the relationship between unemployment and underemployment of labor and
urbanization.
Readings
In the Meier and Rauch volume:
Overview (Urbanization and the Informal Sector) [ pp. 331-335]
Selection VI.A.1 – Urban Growth in Developing Countries: A Demographic Reappraisal
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Selection VI.A.2 – Urban Primacy, External Cost, and Quality of Life
Exhibit VI.B.1 – Rural-Urban Migration and the Informal Sector
Selection VI.B.2 – A Model of Labor Migration and Urban Unemployment in Less
Developed Countries
Note VI.B.1 – The Lewis Versus the Harris-Todaro View of Underemployment in Less
Developed Countries
Selection VI.B.3 – Wage Spillover and Unemployment in a Wage-Gap Economy: the
Jamaican Case
Note VI.B.2 – Econometric Studies of Migration
Selection VI.B.4 - Labour Market Modelling and the Urban Informal Sector
Selection VI.B.5 – The Role of the Informal Sector in the Migration Process: A Test of
Probabilistic Migration Models and Labour Market Segmentation for India
In the Mosk volume:
Chapter 4.
C.1
Mega-city Growth in the Developing World
We examine the nature of urbanization in developing countries, focusing upon the
growth and size of primate cities, the urban hierarchy, and global city theory.
C.2
The Harris/Todaro Model versus the Labor Surplus Model Along the Lines of
Lewis
We contrast the Harris/Todaro and Fei-Ranis/Lewis models of underemployment
and their implications for urban and industrial development.
D
Income Distribution and Human Resources
In this portion of the lectures we deal with the distribution of income and the distribution of the
standard of living embodied in human resources for economic development prospects.
Readings
In the Meier and Rauch volume:
Overview (Income Distribution) [pp. 433-436]
Note VIII.1 – Measurement of Income Inequality
Exhibit VIII.1 – Income Distribution and Inequality Measures
Selection VIII.A.1 – Economic Growth and Income Inequality
Selection VIII.A.2 – A Note on the U Hypothesis Relating Income Inequality and
Economic Development
Selection VIII.A.3 – Economic Development, Urban Unemployment, and Income
Inequality
Selection I.A.2 – Income Poverty
Note 1.A.2 – Other Important Differences Between Developed and Less Developed
Countries
Exhibit IV.B.1 – Health Indicators
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Exhibit IV.C.1 – Demographic Data and Population Forecasts by Human Development
Index and Geographic Region
Overview (Human Resources) [pp. 184-186]
Note IV.A.1 – Three Views of the Contribution of Education to Economic Growth
Selection IV.A.1 – Economic Impact of Education
Comment IV.A.1 – Updated Estimates of Returns to Investment in Education
Comment IV.A.2 – Ability Differences, Spillovers, and the Returns to Investment in
Education
Selection IV.A.2 – Creating Human Capital
Selection IV.A.3 – Schooling and Labor Market Consequences of School Construction in
Indonesia
Selection IV.A.4 – Interpreting Recent Research on Schooling in Developing Countries
Selection IV.A.5 – School Inputs and Educational Outcomes in South Africa
Selection IV.B.2 – Identifying Impacts of Intestinal Worms on Health in the Presence of
Treatment Externalities
Selection IV.B.3 – Confronting AIDS
In the Mosk volume:
Chapters 5.
D.1
The Size Distribution of Income and the Kuznets Hypothesis
In this section we discuss how to measure the distribution of household incomes
within a population, placing the analysis in the context of the U-shaped relationship between
development of inequality and economic development advanced by Kuznets.
D.2
Measuring the Incidence of Poverty in Absolute Terms
We turn to measuring poverty in terms of absolute (as opposed to relative)
characteristics, looking at evidence on the biological standard of living of children assembled by
the World Health Organization.
D.3
Political Stability and Income Distribution
How is the political stability of a country related to its income/wealth distribution? We
take up this issue here, using our discussion as background for the analysis undertaken in Section
F of the lectures.
D.4
Human Resource Enhancing Infrastructure
In this section we discuss examples of how infrastructure that enhances human resources
(especially education) develops in tandem with income per capita growth and changes in the
demand for labor.
E
Investment and Savings
This section deals with the accumulation of physical and financial capital, and on the
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relationship between financial depth and financial infrastructure and economic growth.
Readings
In the Meier and Rauch volume:
Overview (Investment and Finance) [pp. 293-296]
Note 1.C.1 – Classical Growth Theory
Note 1.C.2 – New Endogenous Growth Theory
Note V.1 – The AK Model
Selection V.1 – Is Fixed Investment the Key to Economic Growth?
Selection V.2 – Financial Development and Economic Growth
Selection V.3 – Taming International Capital Flows
Selection V.4 – Can Foreign Aid Buy Growth?
Selection V.5 – The Microfinance Promise
In the Mosk volume:
Chapters 8 and 9.
E.1
Sources of Growth Accounting and Models of Economic
Growth
In this section we take up a variety of theories of growth based upon accumulation of
capital and technological progress.
E.2
Savings and Infrastructure Driven Growth: Japan as an Example
In this portion of the lectures we discuss the economic development of Japan between the
1880s and 1938, developing a theory of infrastructure driven growth that emphasizes the
importance of the evolution of financial infrastructure and physical infrastructure for the
expansion of industrial activity.
F
Political Economy and the State
We turn to the interaction of politics with the implementation of government policies, and
the impact of policy implementation upon economic development.
Readings
In the Meier and Rauch volume:
Overview (Political Economy) [pp. 489-493]
Selection IX.A.1 – Public Policy and the Economics of Development
Exhibit IX.A.1 – Market Failure and State Intervention
Comment IX.A.1 – Development Planning
Comment IX.A.2 – Governing the Market
Selection VIII.B.1 – The Middle Class Consensus and Economic Development
Note IX.B.1 – What Are Rents?
Selection IX.B.1 – Political Economy of the Rent-Seeking Society
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Comment IX.B.1 – Complete Rent Dissipation Through Competitive Rent Seeking in the
Harris-Todaro Model
Comment IX.B.2 – The Relationship Between Rent Seeking and Corruption
Selection IX.B.2 – The Regulation of Entry
Selection IX.B.3 – Africa’s Growth Tragedy: Policies and Ethnic Divisions
Selection IX.C.1 – Institutions and Economic Performance: Cross-Country Tests Using
Alternative Institutional Measures
Selection IX.C.2 – The State as Problem and Solution: Predation, Embedded Economy,
and Structural Change
Selection IX.C.4 – Bureaucratic Structure and Bureaucratic Performance in Less
Developed Countries
Selection III.A.4 – Getting Interventions Right: How South Korea and Taiwan Grew
Rich
Selection IX.C.3 – Taking Trade Policy Seriously: Export Subsidization as a Case Study
in Policy Effectiveness
In the Mosk volume:
Chapters 6, 7, 10, 11, and 12.
F.1
Politics and Policies: The Distinction
In this section we discuss the difference between politics and policies, pointing to the
importance of corruption, bureaucratic independence, and the effectiveness of policy
implementation.
F.2
Hammering Out Political Consensus: The Middle Class Hypothesis
The classical Marxist stage theory of the bourgeois state is used to motivate discussion of
contemporary theories that emphasize characteristics of a state representing a relatively
homogeneous “middle class” electorate.
F.3
Types of Policies
This segment of the lectures begins with a general discussion of policy making, then turns
to a particular types of policy approach that may have played a major role in the growth of the
East Asian “miracle growth” economies, the coordination approach. Examples involving
infrastructure development and industrial policy are discussed as examples of coordination policy
making.
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G
Trade
We close out the lectures, focusing on the transition from import substitution to export
promotion, and on the importance of geography for shaping trade opportunities.
Readings
In the Meier and Rauch volume:
Overview (International Trade and Technology Transfer) [pp. 133-136]
Exhibit III.A.1 – Share of Primary Products in Merchandise Exports and Index of Export
Concentration
Note III.A.1 – Natural Resource Abundance, International Trade, and Economic Growth
Note III.A.2 – Import-substituting Industrialization and the Infant-Industry Argument
Selection III.A.1 – Typology in Development Theory: Retrospective and Prospects
Comment III.A.1 – Moving up the Ladder and Changes in Relative Costs of the Factors
of Production
Selection III.A.3 – The Process of Industrial Development and Alternative Development
Stategies
Note III.A.3 – Tradeability of Intermediate Goods, Linkages, and Bottlenecks
Note III.B.1 – Learning in International Production Networks
Selection III.B.1 – Technology Gaps Between Industrial and Developing Countries: Are
There Dividends for Latecomers?
Selection III.B.2 – The Potential Benefits of FDI for Less Developed Countries
Note III.B.2 – Trade as Enemy, Handmaiden, and Engine of Growth
G.1
Macroeconomic Balance and the Trade Balance
We begin the discussion of trade with an analysis of the savings, domestic investment
balance, and the implications of the trade balance for economic growth and debt owed to foreign
lenders.
G.2
Import Substitution versus Export Promotion
In this section we contrast the trade patterns of Latin America and East Asia during the
period between 1950 and the early 1970s, focusing on the differing fates of export promoting
strategies and import substituting trade strategies.
G.3
The Gravity Model and Regional Trade
We close the discussion of trade by using the gravity model of trade to frame a discussion
of the role that regional economic engines play in shaping regional trade and economic growth,
and the relationship between this trade gravitation and the growth of regional trade blocs. Is this
good or bad for the further expansion of global trade organizations like the World Trade
Organization?
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