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The Political Economy of Growth in Latin America and East Asia: Some Empirical Evidence
Author(s) -
Comeau Ludovic
Publication year - 2003
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1093/cep/byg026
Subject(s) - latin americans , east asia , economics , foreign direct investment , human capital , inflation (cosmology) , politics , development economics , economic freedom , investment (military) , macroeconomics , political science , economic growth , china , market economy , physics , theoretical physics , law
This article examines the historical records of poor economic performance of Latin America compared to East Asia's relative success in the 1970s and 1980s. Although both regions adopted similar postwar protective inward‐oriented development strategies, their experiences and economic outcomes diverged significantly in subsequent years. Some have argued that East Asian countries outperformed Latin American ones because they implemented appropriate policies that were adaptive to changes in the global market scene. This study shows that the respective sociopolitical and institutional environment of the two regions was also an important factor contributing to their economic outcomes. A growth model augmented with policy‐driven and sociopolitical variables is developed. Using data for selected countries in both regions, the results confirm the hypothesis of a negative direct (efficiency) effect of sociopolitical instability on growth, with an additional indirect (accumulation) effect through investment, irrespective of a country's location. Policies adopted by governments, particularly to control inflation and foreign indebtedness and to enhance economic freedom and human capital accumulation, appear crucial for stability. Such policies influenced economic performance through both the direct and the indirect channels. (JEL B25 , E13 , F43 , H19 , O57 )