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The East Asian model of economic development

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Abstract

Unlike existing models of the rapid growth of the East Asian economies that are based on stylised facts, this paper formulates a model by introducing an all-encompassing (core) variable that explains the unique path to success in East Asia. Using three propositions, the model explains the transition from a backward economy to an industrial economy. Central to the model is policy-augmented human capital (PAHC)—human capital with a road map for development—led by a capable leader. The model is unique in that it validates the critical role of human capital in a time of ‘high development theory’ when the emphasis was skewed towards the accumulation of physical capital, and the role of government at a time when interventionist policies were either failing elsewhere (in the 1950s and 1960s) or facing opposition (in the 1970s and 1980s). The success of the East Asian model provides evidence pointing to a preference for economic development over democracy.

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