IDEAS home Printed from https://ideas.repec.org/p/iza/izapps/pp202.html
   My bibliography  Save this paper

Coordinating Success, Predicting Failure? Why the Market vs State Debate Misses the Mark in Asia

Author

Listed:
  • Commander, Simon

    (IE Business School, Altura Partners)

  • Estrin, Saul

    (London School of Economics)

Abstract

Much of the debate about Asia's economic success has focussed on the respective roles of the market and state. It has been argued that industrial policy has helped address market failures and achieve critical coordination of development planning and process. Yet, starkly contrasting market and state ignores the way that both have been closely intertwined. Indeed, across the different economic and political systems in Asia, a common feature has emerged in which government and big, diversified and mostly family-owned business groups work in close connection to support their mutual interests. Through such ties, Asia has found a solution to many of the problems of economic development by a different type of coordination. Whilst highly effective in a phase of extensive growth, such connections carry less beneficial consequences. Not least, the accumulation of market power and the restraint of competition that result from preferential ties between business groups and political power. At the same time, the lock-hold of business groups limits growth in the formal economy, in employment whilst also stoking inequality. Further, as Asia searches for greater innovation to drive progress, such close ties are far more likely to stand in the way, deterring new entrants and holding back the creation of more broad-based innovation. Breaking down the entrenched power of connected business groups will require new policies that address head-on the distortions that these connections create. These include measures to deter recourse to the business group format itself.

Suggested Citation

  • Commander, Simon & Estrin, Saul, 2023. "Coordinating Success, Predicting Failure? Why the Market vs State Debate Misses the Mark in Asia," IZA Policy Papers 202, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izapps:pp202
    as

    Download full text from publisher

    File URL: https://docs.iza.org/pp202.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pranab Bardhan, 2016. "State and Development: The Need for a Reappraisal of the Current Literature," Journal of Economic Literature, American Economic Association, vol. 54(3), pages 862-892, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Commander, Simon & Estrin, Saul & De Silva, Thamashi, 2024. "Political connections, business groups and innovation in Asia," LSE Research Online Documents on Economics 120082, London School of Economics and Political Science, LSE Library.
    2. Commander, Simon & Estrin, Saul & Thomas, Naveen & Lingineni, Varun, 2024. "Liberalisation, Concentration and Diversification: Business Groups in India, 2000-2020," IZA Discussion Papers 17428, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jean-Paul Faguet & Camilo Matajira & Fabio Sánchez-Torres, 2022. "Constructive extraction? Encomienda, the colonial state, and development in Colombia," Documentos CEDE 20105, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Li, Lixing & Liu, Kevin Zhengcheng & Nie, Zhuo & Xi, Tianyang, 2021. "Evading by any means? VAT enforcement and payroll tax evasion in China," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 770-784.
    3. Asadullah, M. Niaz & Savoia, Antonio, 2018. "Poverty reduction during 1990–2013: Did millennium development goals adoption and state capacity matter?," World Development, Elsevier, vol. 105(C), pages 70-82.
    4. Andersson, Jens & Andersson, Martin, 2019. "Beyond Miracle and Malaise: Social Capability in Côte d’Ivoire and Senegal during the Development Era 1930-1980," Lund Papers in Economic History 202, Lund University, Department of Economic History.
    5. Prasenjit Banerjee & Vegard Iversen & Sandip Mitra & Antonio Nicolò & Kunal Sen, 2018. "Politicians and Their Promises in an Uncertain World: Evidence from a Lab-in-the-Field Experiment in India," Economics Discussion Paper Series 1806, Economics, The University of Manchester.
    6. Albuquerque Sant'Anna, André & Costa, Lucas, 2021. "Environmental regulation and bail outs under weak state capacity: Deforestation in the Brazilian Amazon11The authors gratefully acknowledge Antonio Ambrózio, Juliano Assunção, Arthur Bragança, Filipe ," Ecological Economics, Elsevier, vol. 186(C).
    7. Kong, Dongmin & Kong, Gaowen & Liu, Shasha & Zhu, Ling, 2022. "Does competition cause government decentralization? The case of state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 50(4), pages 1103-1122.
    8. Gwendoline Promsopha & Antoine Vion, 2017. "Thailand's 'limited order trap' : a critical application of North, Wallis and Weingast," Post-Print hal-01612052, HAL.
    9. Heckelman, Jac C. & Wilson, Bonnie, 2019. "The growth-maximizing level of regulation: Evidence from a panel of international data," European Journal of Political Economy, Elsevier, vol. 59(C), pages 354-368.
    10. Lei, Zhenhuan & Nugent, Jeffrey B., 2018. "Coordinating China's economic growth strategy via its government-controlled association for private firms," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1273-1293.
    11. Deng, Hanzhi, 2021. "The merit of misfortune: Taiping Rebellion and the rise of indirect taxation in modern China, 1850s-1900s," Economic History Working Papers 108564, London School of Economics and Political Science, Department of Economic History.
    12. Usman Qadir (ed.), 2024. "Wheels Of Change: Tracing Pakistans Automotive Evolution Through Political Economy And Technology Acquisition," PIDE Books, Pakistan Institute of Development Economics, number 2024:08.
    13. Arik Sadeh & Claudia Florina Radu & Cristina Feniser & Andrei Borşa, 2020. "Governmental Intervention and Its Impact on Growth, Economic Development, and Technology in OECD Countries," Sustainability, MDPI, vol. 13(1), pages 1-30, December.
    14. Minghui Zhang & Weiqi Xia, 2022. "Research on the Law of China’s Rural Land Institutional Changes: An Analytical Framework of Economic Efficiency and Distributive Equity," Land, MDPI, vol. 11(12), pages 1-15, December.
    15. Saul Estrin, 2020. "Towards A Framework To Understand The Relative Performance Of State-Owned Firms," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(225), pages 11-32, April – J.
    16. Stelios Michalopoulos & Elias Papaioannou, 2020. "Historical Legacies and African Development," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 53-128, March.
    17. Sudipto Mundle, 2018. "Fifty years of Asian experience in the spread of education and healthcare," WIDER Working Paper Series wp-2018-97, World Institute for Development Economic Research (UNU-WIDER).
    18. Gauri, Varun & Jamison, Julian C. & Mazar, Nina & Ozier, Owen, 2019. "Motivating Bureaucrats through Social Recognition: External Validity — A Tale of Two States," IZA Discussion Papers 12251, Institute of Labor Economics (IZA).
    19. Silvia, Marchesi & Tania, Masi, 2019. "Allocation of implementing power: Evidence from World Bank projects," Working Papers 399, University of Milano-Bicocca, Department of Economics, revised Jan 2019.
    20. Mundle, Sudipto, 2018. "Development of Education and Health Services in Asia and the Role of the State," Working Papers 18/239, National Institute of Public Finance and Policy.

    More about this item

    Keywords

    Asia growth; industrial policy; business groups;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izapps:pp202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.