- Email: [email protected]
Introduction to part 6
INTRODUCTION
TO PART 6
HOLLIS B. CHENERY
Harvard University
The rapid increase in both the number of developing countries and the range of available data has made comparative analysis one of the most popular forms of development research. It produced a great expansion of statistical studies of the "development patterns" type, as illustrated in Part 2 on the structural transformation. Identification of the stylized facts of development then led to analyses of the typical effects of development policies and a search for superior strategies. This concluding part of the Handbook illustrates some of the findings of these comparative-historical studies. The editors have resisted the temptation to enforce a uniform approach on the five authors, although we have tried to get them to address a common set of questions. Since there has been a shift in interest from differences in internal to external development policies, it was not difficult to reach agreement on "Primary Exporting Countries" (Chapter 29), "Import Substitution" (Chapter 30) and "Outward Orientation" (Chapter 31) as alternative strategies that cover a wide range of country experiences. In some form these three categories are found in almost all typologies of development experience. As Syrquin shows in Chapter 7 of Part 2, controlling for these differences in external policies leads to more homogeneous categories for structural analysis. The choice of internal criteria for this purpose is less clear, since the most obvious candidate-the level of investment-has shown less explanatory power in recent years. Perkins and Syrquin have therefore chosen to investigate the relations between population size and development performance (Chapter 32), using both historical and econometric tests. Although there is no clear-cut theoretical basis for this relationship, it is obvious that China, India, and Brazil face some quite different choices from their smaller counterparts.
Comparing development strategies A development strategy can be defined in terms of two sets of factors: (1) initial conditions: structural features such as natural resources, and other elements that are usually treated as "endowments"; and (2) policy choices: social preferences (growth vs. equity), trade policies (outward vs. inward), the levels of investment, etc. Handbook of Development Economics, Volume II, Edited by H. Chenery and T.N. Srinivasan © Elsevier Science Publishers B.V., 1989
1538
H.B. Chenery
Earlier studies of development experience usually considered each of these factors separately, but the more recent trend is to identify representative country types on the basis of two or three dominant features. The authors in Part 6 have all used some form of this typological approach. Although all four chapters try to identify common dements of postwar experience, their authors have adopted quite different approaches to this task. For example, Stephen Lewis focuses on the characteristic problems of primary exporters. He controls for their differences by comparing pairs of countries that have similar initial conditions. In a typical case, Australia is shown to have achieved better results than Argentina by choosing policies more in keeping with its comparative advantage. Perkins and Syrquin also compare countries that have similar initial conditions but follow different policies. Their objective is to identify the effects of scale on the choice of strategy and country performance. Using population as a measure of economic size, they are able to test hypotheses about the relation of scale to trade patterns and other structural characteristics. The two remaining chapters on outward and inward strategies focus on differences in policy choices rather than on initial conditions. In advocating an outward-oriented strategy, Balassa provides statistical evidence of the correlation between the growth of exports and factor productivity and argues that outward orientation contributes to this result. He supports this conclusion by a comparative analysis of outward-oriented and inward-oriented countries in the pre- as well as the post-oil shock periods. Bruton, on the other hand, adopts a broad definition of import substitution as a general strategy for transforming the economy. He thus expands the list of potential benefits of inward orientation that can be achieved over longer periods of time.
Lessons from experience Despite these differences in approach, all the authors in Part 6 are looking for typical relationships between initial conditions and policy choices. At a minimum this type of analysis leads to the identification of feasible strategies, such as how to manage the deindustrialization that is induced by the expansion of primary exports (Dutch Disease). A more ambitious objective is to establish the properties of strategies that are optimal under a range of conditions, which Balassa asserts to be the case for outward-oriented trade policies. A statistical background for typological approaches to development has been given by Syrquin (Chapter 7, p. 249), who classifies 106 countries according to three characteristics of their development strategies: size, openness, and trade orientation. He is then able to measure the typical relations between differences in each factor and the aggregate growth rates for the period 1950-1983.
Introduction to Part 6
1539
When each of these characteristics is considered separately, Table 7.5 shows that large countries have grown more rapidly than small, that specialization in manufacturing has been more productive than in primary products, and that Balassa's argument for the advantages of outward orientation was supported in the postwar period, regardless of the initial conditions. By contrast the higher growth rate of large countries is concentrated in the subgroup of primary exporters, and the virtues of manufacturing specialization only appear in the subgroup of small countries. The popularity of comparative analysis has led to a re-examination of the categorization of countries on which it is based. One of the most controversial is the evaluation of the performance of India vs. South Korea, in which most economists favor the latter because of its much higher growth in total factor productivity. Bruton's advocacy of the opposing view (Chapter 31) demonstrates the effect of a basic difference in the underlying assumptions about development processes.
The choice of strategy The several surveys of country experiences in Part 6 provide little support for the idea that there is a single optimal strategy for all situations. A more realistic goal for comparative studies is to establish some of the properties of strategies and policy instruments that have been relatively effective. This view is in keeping with theoretical findings about second-best policies, which are likely to vary with the initial conditions. In sum, the main objectives of Part 6 are to identify typical strategies, and to examine how they have worked under different conditions. Typological comparisons indicate that there have been examples of successful country performance starting from a wide variety of initial conditions. While it may not be possible to determine the best set of policies for each type of country, a beginning has been made in studying the relations between policy and performance under different sets of constraints. The four chapters in Part 6 provide examples of success under a wide range of conditions, together with some working hypotheses as to the major factors involved.
TO PART 6
HOLLIS B. CHENERY
Harvard University
The rapid increase in both the number of developing countries and the range of available data has made comparative analysis one of the most popular forms of development research. It produced a great expansion of statistical studies of the "development patterns" type, as illustrated in Part 2 on the structural transformation. Identification of the stylized facts of development then led to analyses of the typical effects of development policies and a search for superior strategies. This concluding part of the Handbook illustrates some of the findings of these comparative-historical studies. The editors have resisted the temptation to enforce a uniform approach on the five authors, although we have tried to get them to address a common set of questions. Since there has been a shift in interest from differences in internal to external development policies, it was not difficult to reach agreement on "Primary Exporting Countries" (Chapter 29), "Import Substitution" (Chapter 30) and "Outward Orientation" (Chapter 31) as alternative strategies that cover a wide range of country experiences. In some form these three categories are found in almost all typologies of development experience. As Syrquin shows in Chapter 7 of Part 2, controlling for these differences in external policies leads to more homogeneous categories for structural analysis. The choice of internal criteria for this purpose is less clear, since the most obvious candidate-the level of investment-has shown less explanatory power in recent years. Perkins and Syrquin have therefore chosen to investigate the relations between population size and development performance (Chapter 32), using both historical and econometric tests. Although there is no clear-cut theoretical basis for this relationship, it is obvious that China, India, and Brazil face some quite different choices from their smaller counterparts.
Comparing development strategies A development strategy can be defined in terms of two sets of factors: (1) initial conditions: structural features such as natural resources, and other elements that are usually treated as "endowments"; and (2) policy choices: social preferences (growth vs. equity), trade policies (outward vs. inward), the levels of investment, etc. Handbook of Development Economics, Volume II, Edited by H. Chenery and T.N. Srinivasan © Elsevier Science Publishers B.V., 1989
1538
H.B. Chenery
Earlier studies of development experience usually considered each of these factors separately, but the more recent trend is to identify representative country types on the basis of two or three dominant features. The authors in Part 6 have all used some form of this typological approach. Although all four chapters try to identify common dements of postwar experience, their authors have adopted quite different approaches to this task. For example, Stephen Lewis focuses on the characteristic problems of primary exporters. He controls for their differences by comparing pairs of countries that have similar initial conditions. In a typical case, Australia is shown to have achieved better results than Argentina by choosing policies more in keeping with its comparative advantage. Perkins and Syrquin also compare countries that have similar initial conditions but follow different policies. Their objective is to identify the effects of scale on the choice of strategy and country performance. Using population as a measure of economic size, they are able to test hypotheses about the relation of scale to trade patterns and other structural characteristics. The two remaining chapters on outward and inward strategies focus on differences in policy choices rather than on initial conditions. In advocating an outward-oriented strategy, Balassa provides statistical evidence of the correlation between the growth of exports and factor productivity and argues that outward orientation contributes to this result. He supports this conclusion by a comparative analysis of outward-oriented and inward-oriented countries in the pre- as well as the post-oil shock periods. Bruton, on the other hand, adopts a broad definition of import substitution as a general strategy for transforming the economy. He thus expands the list of potential benefits of inward orientation that can be achieved over longer periods of time.
Lessons from experience Despite these differences in approach, all the authors in Part 6 are looking for typical relationships between initial conditions and policy choices. At a minimum this type of analysis leads to the identification of feasible strategies, such as how to manage the deindustrialization that is induced by the expansion of primary exports (Dutch Disease). A more ambitious objective is to establish the properties of strategies that are optimal under a range of conditions, which Balassa asserts to be the case for outward-oriented trade policies. A statistical background for typological approaches to development has been given by Syrquin (Chapter 7, p. 249), who classifies 106 countries according to three characteristics of their development strategies: size, openness, and trade orientation. He is then able to measure the typical relations between differences in each factor and the aggregate growth rates for the period 1950-1983.
Introduction to Part 6
1539
When each of these characteristics is considered separately, Table 7.5 shows that large countries have grown more rapidly than small, that specialization in manufacturing has been more productive than in primary products, and that Balassa's argument for the advantages of outward orientation was supported in the postwar period, regardless of the initial conditions. By contrast the higher growth rate of large countries is concentrated in the subgroup of primary exporters, and the virtues of manufacturing specialization only appear in the subgroup of small countries. The popularity of comparative analysis has led to a re-examination of the categorization of countries on which it is based. One of the most controversial is the evaluation of the performance of India vs. South Korea, in which most economists favor the latter because of its much higher growth in total factor productivity. Bruton's advocacy of the opposing view (Chapter 31) demonstrates the effect of a basic difference in the underlying assumptions about development processes.
The choice of strategy The several surveys of country experiences in Part 6 provide little support for the idea that there is a single optimal strategy for all situations. A more realistic goal for comparative studies is to establish some of the properties of strategies and policy instruments that have been relatively effective. This view is in keeping with theoretical findings about second-best policies, which are likely to vary with the initial conditions. In sum, the main objectives of Part 6 are to identify typical strategies, and to examine how they have worked under different conditions. Typological comparisons indicate that there have been examples of successful country performance starting from a wide variety of initial conditions. While it may not be possible to determine the best set of policies for each type of country, a beginning has been made in studying the relations between policy and performance under different sets of constraints. The four chapters in Part 6 provide examples of success under a wide range of conditions, together with some working hypotheses as to the major factors involved.