Lic. economia

The Developing Economies, XXXV-4 (December 1997): 341–57

A COMPARATIVE STUDY OF DEVELOPMENT MECHANISMS IN KOREA AND TAIWAN: INTRODUCTORY ANALYSIS
TAMIO HATTORI $ YUKIHITO SAT O

INTRODUCTION extremely rare type of high-level, sustained postwar economic growth experienced by the Republic of Korea (hereafter Korea) and Taiwan has drawn the attention of many scholars interested in economicdevelopment. Many have also attempted to analyze the two economies as examples of identical economic phenomena. Since both economies’ development pattern can be characterized by export-led industrialization depending on the Japanese and U.S. markets, such views are not at all surprising. However, having a common development pattern does not necessarily guarantee the existence of a common mechanism bywhich development was achieved. In fact, there is a heated debate in progress concerning the way in which Korea and Taiwan achieved development between those who support a market-led development hypothesis and those who support a government-led development hypothesis. In the present paper, we aim to rid ourselves of such a debate by suggesting that there were different mechanisms by which the twoeconomies developed and discussing the reasons why these mechanisms are different. In Section I, we will define what we mean by “development pattern” and “development mechanism.” In Section II we will verify the similarity of Korea and Taiwan with respect to highlevel economic growth and their development patterns. Then in Section III, we will review the research to date concerning developmentmechanism, show that both the market-led and government-led development hypotheses have been built upon strong a priori assumptions, and argue that the similarities and differences between development mechanisms in the two economies should be reexamined after removing such assumptions from consideration. This is one important aim of this paper. In Section IV, we will attempt to show through acomparison of trade balances, growth of total factor productivity (TFP), enterprise and business-group scale, and the development processes of individual industries in the two economies that it is impossible to imagine that Korea and Taiwan developed by the same

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Fig. 1.
Political factors, Social factors

THE DEVELOPING ECONOMIES

Development Pattern and Development MechanismDevelopment mechanism (narrow meaning), Government / Market Development pattern, Industrialization / Agricultural development, etc. Economic development

Development mechanism (broader meaning)

Source: Prepared by the authors.

mechanism. Okuda’s paper in this special issue shows us the difference in TFP growth between two economies. In our investigation of enterprise scale, we will rely onthe results of the research done by Abe and Kawakami, and with respect to our industrial analysis, we will rely on Sat$o’s research on the machine-tool and electronics industries and Abe and Kawakami’s research on synthetic fiber industry. Studies of enterprise scale and the electronics industry are also contained in this issue. Section V lays out the other important aim of this paper: to discuss thereasons why the development mechanisms in the two economies differ, by offering three explanatory hypotheses based on accumulation at the starting point of postwar industrialization, the relationship between government and society, and the mechanism of social network formation. We will rely on the paper written for this special issue by Wakabayashi concerning the relationship between governmentand society and on the papers written by Hattori and Numazaki on social network formation. A concluding section will outline the implications of our study. I. DEVELOPMENT PATTERN AND DEVELOPMENT MECHANISM We will consider the reasons for high-level economic growth in Korea and Taiwan as multifaceted like Figure 1. Here we would like to define two elements of such a logical structure: “pattern” and...