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    Making A Miracle - Lucas PDF

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    Making a Miracle Robert E. Lucas, Jr. Econometrica, Vol. 61, No. 2 (Mar., 1993), 251-272. Stable URL: bttp//links jstor.org/sic¥?sict=0012-9682%28199303%2961%3A2%3C25 1%3AMAMS%3E2,0,CO%3B2-M ‘Your use of the ISTOR archive indicates your acceptance of JSTOR’s Terms and Conditions of Use, available at hhup:/www.jstor org/about/terms.html. JSTOR’s Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the sereen or printed page of such transmission. Econometrica is published by The Econometric Society. Please contact the publisher for further permissions regarding the use of this work, Publisher contact information may be obtained at hutp:/www jstor-org/journalsveconosoc.html. Econometrica (©1993 The Econometric Society ISTOR and the ISTOR logo are trademarks of ISTOR, and are Registered in the U.S. Patent and Trademark Office For more information on ISTOR contact jstor-info@umich.edv, (©2003 JSTOR bupslwww jstor.org/ Pri Oct 10 16:11:04 2003, Economeica, Vol 61, No, 2 (Match, 193), 251-272 MAKING A MIRACLE! By Roser E, Lucas, Ie. ‘This lecture surveys recent models of growth and trade in search of descriptions of {technologies that are consistent with episodes of very rapid income growth, Emphasis placed on the on-theyob accumulation of human capital: learning by doing. Possible ‘connections between learning rates and international trade are discussed Keywonos: Growth, productivity, on-the-job taining, learning 1. INTRODUCTION Iw 1960, THE Prtirpines AND SouTH Korea had about the same standard of living, as measured by their per capita GDPs of about $640 U.S. 1975, The two countries were similar in many other respects. There were 28 million people in the Philippines and 25 million in Korea, with slightly over half of both popula- tions of working age. Twenty seven percent of Filippino’s lived in Manila, 28 percent of South Koreans in Seoul. In both countries, all boys of primary school age were in school, and almost all gitls, but only about a quarter of secondary school age children were in school. Only 5 percent of Koreans in their early twenties were in college, as compared to 13 percent in the Philippines. Twenty ix percent of Philippine GDP was generated in agriculture, and 28 percent in industry. In Korea, the comparable numbers were 37 and 20 percent. Ninety six percent of Philippine merchandise exports consisted of primary commodities and 4 percent of manufactured goods. In Korea, primary commodities made up 86 percent of exports, and manufactured goods 14 (of which 8 were textiles). From 1960 to 1988, GDP per capita in the Philippines grew at about 1.8 percent per year, about the average for per capita incomes in the world as a whole. In Korea, over the same period, per capita income grew at 6.2 percent per year, a rate consistent with the doubling of living standards every 11 years. Korean incomes are now similar to Mexican, Portuguese, or Yugoslavian, about three times incomes in the Philippines, and about one third of incomes in the United States? I do not think it is in any way an exaggeration to refer to this continuing transformation of Korean society as a miracle, or to apply this term to the very similar transformations that are occurring in Taiwan, Hong Kong, and Singa- pore. Never before have the lives'of so many people (63 million in these four areas in 1980) undergone so rapid an improvement over so long a period, nor (with the tragic exception of Hong Kong) is there any sign that this progress is * Prepated for the 1991 Fisher-Schultz Lecture, given in September atthe European meetings of the Econometric Society. 1am arateful to Jose Scheinkman, T. W. Schultz, Nancy Stokey, Alwyn Young, and the referes for discussion and criticism, The figures in the fist paragraph are taken from the 1984 World Development Report. The income and population figures in ths paragraph and the next are from Summers and Heston (1991. ast 252 ROBERT E. LUCAS, JR. near its end. How did it happen? Why did it happen in Korea and Taiwan, and not in the Philippines? Questions like these can be addressed at many levels. It is useful to begin simply by listing some of the features of these transformations in addition to their income growth rates. All of the East Asian miracle economies have become large scale exporters of manufactured goods of inereasing sophistica- tion. They have become highly urbanized (no problem for Singapore and Hong Kong!) and increasingly well-educated. They have high savings rates. They have pro-business governments, following differing mixes of laissez faire and mercan- tilist commercial policies. ‘These facts—or at least some of them—must figure in any explanation of the growth miracles, but they are additions to the list of events we want (0 explain, not themselves explanations. We want to be able to use these events to help in assessing economic policies that may affect growth rates in other countries. But simply advising a society to “follow the Korean model” isa litte like advising an aspiring basketball player to “follow the Michael Jordan model.” To make use of someone elses success- ful performance at any task, one needs to be able to break this performance

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