زیرساخت های عمومی، سازمان تولید، و توسعه اقتصادی

We develop a political economy model of growth to examine economic development led by the interactions between an economic decision concerning a firm’s production technology (CRS vs. IRS technology) and a political decision concerning public infrastructure. We show that multiple equilibrium growth paths occur due to differences in expectations regarding the quality of public infrastructure. These multiple paths illustrate why economies with poor initial conditions can catch up to and, furthermore, overtake economies with better initial conditions. Our result could explain the experiences of some East Asian countries where the co-evolution of public infrastructure and industrial transformation spurred economic development.

Over the past five decades, several East Asian countries, including Japan, South Korea, and Taiwan, have experienced rapid growth because of the drastic industrial transformation of production organizations that shifted from engaging in obsolete, inefficient small-scale production to developing modern, efficient large-scale production. However, many other countries have struggled with poverty because they have continued to engage in inefficient small-scale production.1 The adoption of large-scale production is one of the significant driving forces behind economic development (Rosenstein-Rodan, 1943 and Nurkse, 1953). Murphy et al. (1989 on p1003) state that “[V]irtually every country that experienced rapid growth of productivity and living standards over the last 200 years has done so by industrializing. Countries that have successfully industrialized – turned to production of manufactures taking advantage of scale economies – are the ones that grew rich, be they eighteenth-century Britain or twentieth-century Korea and Japan.” Increasing the efficiency of large-scale production requires sufficient aggregate demand and high-quality infrastructure. In particular, the roles of public infrastructure (e.g., power plants, transportation, telecommunications, and the property rights of institutions) are essential. For example, Tybout (2000) survey of empirical studies of manufacturing sectors argues that the high proportion of very small firms in developing countries partly stems from their weak transportation systems, uncertainty about policies, poor rule of law, and corruption. Kummar et al. (2005) and Leaven and Woodruff (2007) also provide empirical evidence of a positive relationship between firm size and the quality of legal institutions. Moreover, the World Bank (1994) provides convincing evidence that public infrastructure has played a crucial role in the drastic industrial transformations in East Asian countries. Table 1 shows GDP and infrastructure stock at their 1995 levels as multiples of their 1975 levels, which is calculated by Straub et al, (2008). East Asia’s economic growth and accumulation of infrastructure stocks has outpaced those of other regions. The coevolution of infrastructure and industrial transformation induced economic development in these countries.

We have developed a political economic model of growth to examine how a firm’s economic decision regarding production organization is affected by the quality of public infrastructure and economic development and how a firm’s economic decisions affect political decisions regarding public infrastructure and economic development. We showed that multiple-equilibrium growth paths occur due to these interactions between economic and political decisions. Even economies with equivalent initial conditions can follow different development paths if they have different expectations about the quality of public infrastructure. These multiple growth paths could explain why backward economies with relatively poor initial conditions can catch up to and, furthermore, overtake more advanced economies that started with relatively better initial conditions. Our result is consistent with the experiences of some East Asian countries where the co-evolution of public infrastructure and industrial transformation spurred economic development.