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Industrial Upgrading and Innovation Capability for Inclusive Growth: Lessons from East Asia

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Innovation and Inclusion in Latin America

Part of the book series: Studies of the Americas ((STAM))

Abstract

Generating and sustaining economic growth can be a precondition for “better and more” distribution and, consequently, inclusive growth. If growth can be sustained not only for a single decade but also for two or more decades, such growth will surely lead to increased equity because it will push wage rates to higher levels. For example, in South Korea and Taiwan in the 1970s and 1980s, sustained growth increased wage rates, reduced poverty, and eventually led to lower inequality (Lee 2010; Bai 1982). China seems to be showing similar signs as sustained growth has caused a labor shortage and increased wage rates in the coastal regions (Jin and Lee 2013). Bhagwati and Panagariya (2013: 8) also observed that, since the 1990s, growth has tended to create more jobs and tax revenues in India that, in turn, pay for social welfare expenditures.

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Notes

  1. 1.

    The exact reason behind this jump in college enrollment is unclear, as is whether the government explicitly saw this as an opportunity for generating a knowledge-based economy and industrial upgrading. Nonetheless, it is in sharp contrast to the policy initiatives in the 1960s and 1970s, when the government promoted many vocational high schools to boost human capital for low- or middle-end manufacturing.

  2. 2.

    An additional exogenous factor was the rapid appreciation of the Japanese yen, which helped to increase the price competitiveness of Korean goods that were in competition with Japanese goods.

  3. 3.

    The ODM firms carry out a majority of the product design, while allowing their customers’ firms to carry out the marketing functions.

  4. 4.

    This nature of market failure is similar to the concept of appropriation failure discussed in Sabel et al. (2012: Ch. 1).

  5. 5.

    A neoclassical counterpart to this concept of system failure would be coordination failure, discussed in Sabel et al. (2012: Ch. 1).

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Acknowledgments

Revision of this chapter has benefitted from the feedback of several scholars, including Barbara Stallings and Eric Hershberg, given during the workshop held in Santiago, Chile, November 2013.

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Authors and Affiliations

  1. Economics/Seoul National University, Seoul, South Korea

    Keun Lee

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  1. Keun Lee
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Editors and Affiliations

  1. Cieplan, Santiago, Chile

    Alejandro Foxley

  2. International & Public Affairs, Brown University, Watson Institute of, PROVIDENCE, Rhode Island, USA

    Barbara Stallings

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Lee, K. (2016). Industrial Upgrading and Innovation Capability for Inclusive Growth: Lessons from East Asia. In: Foxley, A., Stallings, B. (eds) Innovation and Inclusion in Latin America. Studies of the Americas. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-59682-6_3

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