Relationship Between Social Institutions And Economic Growth By Comparing Countries From East Asia And Latin America

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Despite numerous literature on comparing development policies in East Asia and Latin America, the existing literature mainly focuses on the government’s role in the nation’s economic growth (e.g., Haggard and Cheng 1987; Krugman 1994; Birdsall and Jaspersen, 1997; Todaro and Smith2003). There is a lack of research in the effect of social institutions on economic performance in these two regions. The main proposition of this research is an analytical focus on the relationship between social institutions and economic growth by comparing countries from East Asia and Latin America. The reason for comparing East Asia to Latin America’s social institutions is since the East Asian economic development experience is relevant for developing…show more content…
Moreover, there are three elements that contribute to the positive interrelation between the state and firms: an effective state structure, strong business organizations, and the existence of threats to the interests of the business sector or the state (Maxfield and Schneider 1997). Governmental measures have been crucial in the introduction and diffusion of imported technology (Hosono and Saavedra-Rivano 1998). The state was capable of linking technology policies with the overall developmental strategy, and selective acquisition of foreign technologies with the building up of indigenous technological capabilities (Bustelo 1996). Moreover, the state contributed to the adaption and dissemination of modern technologies by establishing public research institutions. Governmental interventions in promoting human capital formation like education and increasing research and development (R&D) expenditures were also instrumental in the fast economic growth of East Asian countries (Hosono and Saavedra-Rivano1998). As such, this research seeks to find what role social institutions play in the outcome of technological capabilities and human capital, since these are critical factors to economic growth. North (1990) defined institutions as the following: “Institutions are the rules of game in a society, or more formally, are the humanly devised constraints that shape human interaction.” Institutions consist of both formal
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