Economic Growth

Topics: Economic growth, Capital accumulation, Economics Pages: 54 (11115 words) Published: September 27, 2014
Making a Miracle
Author(s): Robert E. Lucas, Jr.
Source: Econometrica, Vol. 61, No. 2 (Mar., 1993), pp. 251-272 Published by: The Econometric Society
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Accessed: 21/02/2010 22:13
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Econometrica, Vol. 61, No. 2 (March, 1993), 251-272



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 is placed on the on-the-job accumulation of human capital: learning by doing. Possible connections between learning rates and international trade are discussed. KEYWORDS:

Growth, productivity, on-the-job training, learning.

IN 1960, THE PHILIPPINES 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 populations 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 girls, 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 six 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.2

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 Singapore. 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...
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