Developmental State Model NS 3041 Comparative Economics Francesco

“Deep Determinants” of Economic Development ● Geography: Natural Resources, Distance from Equator ● Integration:

Indicators of Macroeconomic Performance ● Domestic Savings ● Investment ● Trade Openness

Gross National Savings (% of GDP) Source: IMF World Economic Outlook Database (Elson pg.

Gross Domestic Investment (% of GDP) Source: IMF World Economic Outlook Database (Elson pg.

Exports & Imports (% of GDP) Source: IMF World Economic Outlook Database (Elson pg.

Factors Accounting for Latin American Stagnation ● Persistent Macroeconomic Instability ● Weak Integration Into

Causes of Macroeconomic Instability ● Lack of Stable Policy Environment ● High Levels of

Regional Integration Into the Global Economy ● No change in the rate of Total

Share of World Exports (%) Share of World Imports (%) Source: UN Comtrade Data

Quality of Public Institutions Surveys are used to measure institutional effectiveness: ● Government effectiveness

Income Inequality Lowest Quintile Highest Quintile Latin America Argentina (1989) Brazil (1989) Chile (1994)

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“Developmental State Model” NS 3041 Comparative Economics Francesco S. Leonini

East Asia America versus Latin

“Deep Determinants” of Economic Development ● Geography: Natural Resources, Distance from Equator ● Integration: Overall Participation with Global Economy ● Institutions: Success of Public Institutions

Indicators of Macroeconomic Performance ● Domestic Savings ● Investment ● Trade Openness

Gross National Savings (% of GDP) Source: IMF World Economic Outlook Database (Elson pg. 100)

Gross Domestic Investment (% of GDP) Source: IMF World Economic Outlook Database (Elson pg. 100)

Exports & Imports (% of GDP) Source: IMF World Economic Outlook Database (Elson pg. 100)

Factors Accounting for Latin American Stagnation ● Persistent Macroeconomic Instability ● Weak Integration Into Global Economy ● Poor Public Institutions

Causes of Macroeconomic Instability ● Lack of Stable Policy Environment ● High Levels of Inflation ● Non-Competitive Exchange Rates ● Zero to Negative Interest Rates

Regional Integration Into the Global Economy ● No change in the rate of Total Global Exports of Latin America between 1980 and 2000 ● East Asia experienced higher rates of global exports and higher rates of intra-industry trade ● Between 1985 -2000 East Asia received twice the amount of FDI

Share of World Exports (%) Share of World Imports (%) Source: UN Comtrade Data and IMF, World Economic Outlook (pg. 105)

Quality of Public Institutions Surveys are used to measure institutional effectiveness: ● Government effectiveness (EA 71. 3 vs. LA 50. 4) ● Regulatory quality (EA 68. 5 vs. LA 59. 4) ● Political stability (EA 59. 4 vs. LA 51. 2) ● Democratic accountability (EA 6. 0 vs. LA 7. 8) ● Bureaucratic quality (EA 7. 4 vs. LA 5. 1)

Income Inequality Lowest Quintile Highest Quintile Latin America Argentina (1989) Brazil (1989) Chile (1994) Mexico (1992) Venezuela (1990) Asia China (1995) Indonesia (1993) S. Korea Malaysia (1989) Philippines (1988) Thailand (1992) 4. 8 2. 1 3. 5 4. 1 3. 6 52. 1 67. 5 61. 0 55. 3 58. 4 5. 5 8. 7 47. 5 40. 7 4. 6 6. 5 5. 6 53. 7 47. 8 52. 7 Gini 0. 49 0. 36 0. 57 0. 51 0. 48 0. 54 0. 40 0. 41 0. 32 0. 36 0. 48 0. 41 0. 47 Source: World Bank Development Report 1997; Baer and Maloney (1997)

Real GDP Growth per Capita

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