Industrial Policy, Asian Miracle Style

We decipher the riddle of the meteoric rise of the Asian Miracles—Korea, Taiwan, Singapore and Hong Kong, and Japan before them—in the second half of the twentieth century. We argue that the secret of their success lies in the specific type of industrial policy focused on technology and innovation. This overarching policy focused on exports of sophisticated products by domestic firms while fostering fierce domestic competition and accountability for the support received. The successful implementation of this policy depended on a particular type of institutions—a leading agency with a distinct institutional design and a mandate to develop sophisticated industries. The experience of the Asian miracles provides a blueprint for developing economies to achieve rapid convergence with advanced economies. It also suggests a reassessment of the roles of the state and the market, the appropriate tools of industrial policy, and the meaning of “good” institutions.