Factors Behind the Asian Miracle: Entrepreneurship, Education, and Finance

Abstract

An explanation is sought for the Asian economic"miracle" that occurred between the 1960s and 1990s. Theories about theeconomic growth can be divided into two groups. Accumulation theories stressthe role of investments in moving the inputs and outputs along their productionfrictions. Assimilation theories stress the entrepreneurship, innovations, andlearning that were needed to master the new technologies adopted from the moreadvanced industrial nations, with investment in human and physical capital asnecessary, but not sufficient. The components of the two groups of theories arecompared, considering their views on entrepreneurial decision-making, thenature of technology, the economic capabilities of the work force, and the roleof experts. The evidence supports the assimilationist theories. A simple evolutionary model is proposed, in which development takes placethrough the shifting of resources from one technology (craft) to another(modern). Expansion of physical and educational capital per worker is essentialto adoption of modern technology. The vigor of entrepreneurship determines therate of assimilation of modern technology. Both large investments in humancapital and forceful entrepreneurship were key and complementary ingredients inthe Asian miracle. Without the expansion of human capital, aggressiveentrepreneurship would have been stymied; without aggressive entrepreneurship,returns to human capital investment would have been low. (LMH)

Keywords: Regional development, Assimilation, Economic development, Economic models, Transition economies, Educational background, Human capital, Evolution model, Capital investments, Economic theory