THE ROLE OF GOVERNMENT IN HUMAN CAPITAL ACCUMULATION THE EXPERIENCE OF THE FOUR "DRAGONS"

Abstract

The rise of the East Asian economies has become more and more striking, especially the "four dragons" (also well-known as the four tigers or gang of four). The four "dragons" consist of Taiwan, South Korea, Singapore and Hong Kong. It is the remarkable performance in economic development of these four "miracle" economies that has attracted world-wide attention. This paper looks at the role of government in the four economies, with focus on human capital accumulation. The main objective of this paper is to study the role of government in human capital accumulation through both formal education and learning by doing. A modified version of the Lucas (1988) model is used to illustrate the role of formal education and learning by doing in enhancing the rate at which human capital accumulates. As human capital accumulates, a movement in the nature of production from low technology goods to high technology goods will become apparent. Consequently, an economy will be able to enhance economic growth as high technology goods tend to have higher value-added. On one hand, the government has to ensure that there is adequate public expenditure on formal education so as to improve the quality of the labor force. On the other hand, the government must also be able to pick "winners" and then implement industrial policies to promote the targeted high growth sectors. Industrial policies help to accelerate relatively low level of accumulated human capital associated with the reliance on a labor-intensive mode of production, to a more highly-skilled manpower required by industrial specialization towards higher value-added production. The experience of the four NIEs can help to illustrate the importance of the role of government in the process of human capital accumulation through both formal education and learning by doing. Human capital accumulation helps to direct the economy towards the potential high growth sectors which is unduly commendatory in enhancing economic growth. There are several general lessons to be learnt from the experience of the four "dragons". The main focus is on human capital accumulation. The role of government is deemed crucial in any economy's development process. The role of government is even more noticeable in human capital accumulation through formal education and learning by doing.

Human capital accumulation helps to direct the economy towards the potential high growth sectors which is unduly commendatory in enhancing economic growth.

There are several general lessons to be learnt from the experience of the four "dragons". The main focus is on human capital accumulation. The role of government is deemed crucial in any economy's development process. The role of government is even more noticeable in human capital accumulation through formal education and learning by doing.