East Asian Economic Growth—An Evolutionary Perspective

doi:10.4236/jssm.2011.43033

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Journal of Service Science and Management, 2011, 4, 280-283

doi:10.4236/jssm.2011.43033 Published Online September 2011 (http://www.SciRP.org/journal/jssm)

East Asia n Econ omic Growt h—An Evolutionary

Perspecti ve

Fariba Hashemi

Swiss Federal Institute of Technology, Lausanne, Switzerland.

Email: [email protected]

Received June 27th, 2011; revised August 2nd, 2011; accepted August 18th, 2011.

ABSTRACT

The High Performing Asian Economies have been the fastest growing economies anywhe re, anytime. This phenomenal

growth experience has stimulated extensive research on its determinants. What is less known however, is dynamics of

the distribution of income. This paper considers a statistical model to describe convergence of cross-country incomes

acro ss the High Performing Asian Economies. The empirical results illustrate th at diffusio n is a p otential te chnique for

the analysis of spatial dynamics of economic growth.

Keywords: East Asian Economic Growth, Evolutionary Perspective

1. Introduction

The High-Performing Asian Economies (HPAE) have

been the fastest growing economies anywhere, anytime1.

Figure 1 and Table 1 illustrate the strong economic

growth which spread like a wave over the region between

the years of 1960-1995.

Compared to large parts of Asia, Africa and Latin

America, the High Performing Asian Economies have

bee n unu suall y s uc ce ss f ul a t a c hie vi n g high gr owth ra tes.

Figure 1. Str o ng economic growth spread like a wave over

Asia.

Table 1. A sia n economic growth.

(Avera ge Real GDP P erc ent P er Annum)

1960-1969 1970-1979 1980-1989 1990-1995

East Asia

Japan 10.5 5.2 3.8 1.9

Asian “Tigers”

Hong Kong - 7.9 3.0 5.1

Korea 7.7 9.4 8.1 7.9

Taiwan 9.8 10.2 8.1 6 .4

Singapore - 9.5 7.4 8.6

Other high growth*

Malaysis - 8.1 5.8 8.9

Thailand 8.3 7.4 7 .3 8.9

Indonesia 4.0 7.8 5.8 7.1

Other East Asian

Chian 2.9 7.5 9.4 10.2

Philippines 4.9 6.1 2.0 2.4

Vietnam - - - 7.7

Other Asian

India 3.7 3.2 6 .0 4.8

Source: UBS Publi cations 1996, reproduced with permission .

At the same time that the HPAE were growing at over

5.5%, richer industrial economies were growing at

around 2%, South Asia likewise at 2%, and Latin Amer-

ica at 1%. Africa and the Middle East were shrinking2.

The phenomenal growth in HPAE altered the global

economic balance and contributed to closing of the eco-

1For purposes of this paper, High Performing Asian Econo

mies in c lud e:

China, Hong Kong, Indonesia, Japan, Malaysia, South Korea, Singa-

pore, Taiwan, and Thailand.

East Asian Economic Growth—An Evolutionary Perspective

281

nomic gap between the OECD and developing countries.

The growth experience of East Asia has stimulated

extensive research on its determinants [1-5]. Much a tten-

tion has been devoted to the explanation of the shape of

the distribution of income in the region by reference to

steady state arguments. What is less known however, is

the dynamics in question. To fill this gap, the present

paper examines the dynamics in the cross-sectional dis-

tribution of income in High Performing Asian Econo-

mies.

2. The Model

Consider a region consisting of countries with different

levels of income. The set of country incomes forms a

long-run distribution which evolves over time. Assume

that t he d ynamics o f thi s dist rib ution re ly on t wo co unte-

racting forces: 1) a mean-reversion process along time,

driven by mobility of factors of production [6]; and 2) a

diffusion process across regions, driven by search and

learning [7-9].

Consistent with the above, assuming that income be-

haves like a stochastic process and that it is continuous

and Markovian, the evolution over time of income dis-

tribution can be expressed by the following classical

second order partial differential equation:

( )

u sf

ts s

λε

∂∂ ∂

+ −=

∂∂ ∂

(1)

where f measures probability density and s measures in-

come. λ represents the income adjustment rate, u repre-

sents the mean of the distribution in the long run, and ε

represents a diffusion parameter3.

3. Empirical application

3.1. Data and Descriptive Statistics

The empirical analysis employs data on Gross Domestic

Product (GDP) per capita of High Performing Asian

Economies from 1980 to 2007. Figure 2 illustrates the

evolution of the distribution of GDP per capita for the

population4. A steady growth can be observed, with the

South East Asian financial crisis standing out. Table 2

shows the descriptive of GDP per capita for N = 28 years

of data.

3.2. Estimation

The model has been applied to log GDP per capita dis-

tribution of the HPAE as a function of time, to estimate

the five model parameters5. u0 and u denote the initial

and long-run mean of the distribution respectively. σ0

represents the initial standard deviation,

represents

the diﬀusion parameter, and λ represents the income ad-

justment rate. Table 3 reports estimates for the five

model parameters.

The value for the income adjustment parameter

Table 2. Descriptive of GDP per capita for HPAE from

1980 to 200 7.

N Minimum Maximum

Mea n Std . Deviation

GDP 28 3624.87 22790.29 11317. 03 5473.38

Figure 2. Evolution of GDP.

2These fi g u res a re a n n u a l a vera ges , based on GDP per person, 1965-1996.

The author acknowledges and thanks Minimax consulting for the statistical

analysis in this paper.

3Ref [10] provi des a full analysis of this mod el but in a diﬀerent cont ext.

4Data graphed a re yearly mea ns.

East Asian Economic Growth—An Evolutionary Perspective

282

Table 3. P arameter estimates.

Paramet er Valu e Std Error t-Value

λ 1.88 1.01 0.31

u 1.57 0.02 32.54

u0 1.37 0.02 13.15

σ 1.06 0.03 10.90

ε 0.58 0.03 9.90

positive as expected. The va lue for the dif fusio n par ame-

ter

is small and positive, likewise conforming to our

theoretical predictions. The results predict that if one

begins with a normal distribution and allows the model

drive the distribution, the distribution variance will tend

toward a c ons tant

lim

σ ελ

→∞

, and concentrated around

a mean

. Moreover, it can be observed that the mean

and variance of the distribution is clearly evolving, cor-

responding to our theoretical predictions.

4. Conclusions

Our findings have interesting implications for dynamics

of the distribution of income across the High Performing

Asian Economies. The results suggest that diffusion is a

potential technique for the analysis of spatial dynamics

of ec onomic growth.

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doi:10.1007/s001910000048

5The expression representing the time-

development of the distribution

is:

22 2

(( )e)()

2(e 1)2

(,)=e e=e e

su uusu

f stNN

σσ

λλ

ββ

− +−

−−

−

+−

where

= (e1)

βλ

−

=[] =(1e)e

u Efuu

λλ

−−

−+

2 222

=e(1 e)

λλ

σσ λ

−−

+−

is the normalization constant. Ref [11-

14] provide an elaboration,

albeit for different contexts.