The "hidden" side of the "flying-geese" catch-up model: Japan's dirigiste institutional setup and a deepening financial morass

Ozawa, Terutomo

Akamatsu's original "flying geese (FG)" growth model is often used as a frame of reference for both further conceptual elaborations and empirical explorations. So far have only the positive side and results of FG development been focused on and emphasized in connection with Asia's phenomenal growth in the pre-crisis period. The Japanese economy, supposedly Asia's lead goose, is in the eleventh consecutive year of stagnation. How has such a once successful lead goose come to be stricken by financial woes? This paper points out that Japan's once miraculous FG growth was made possible because it established an effective dirigiste catch-up regime in the early postwar period but that Japan's present financial predicament is paradoxically a path-dependent outcome of such an FG strategy. The institutional, especially financial, dimension of FG strategy needs to be taken into account to explain why such a strategy once proved effective but later culminated in a deepening financial morass. The FG model should encompass not only the industrial dimension of catch-up but also its institutional, particularly financial, dimension.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 193
Published Here
February 10, 2011