Takeoffs, Landing, and Economic Growth

Abstract

Economic growth in the East Asian economies was remarkable during the latter part of the 20th century, starting with Japan just after World War II, followed by the East Asian Tigers and “tiger cubs” after that and, most recently, the People’s Republic of China and India. The high, sustained economic growth of these economies during their boom period reduced the disparity between the West and these countries (in terms of standards of living). The source of such extraordinary growth has been a matter of great interest since then, but no attempt has been made so far to model the political economy of takeoffs and landings in the context of economic growth. We empirically define takeoffs and landings, and provide an overlapping generation model with technological change and skill formation to explain the relatively stable growth rates in the Asian economies for decades. The existence of a technology trap, meaning economies cannot afford available advanced technology, may explain why takeoffs are relatively rare, even when many underdeveloped economies are still waiting for their own growth miracle.