Development strategies and economic performance in Third World countries, 1965-92

Third World Quarterly

Volumn 17, Issue 4, 1996, Pages 603-624

  Hout, Wil ^a  

^a RADBOUD UNIVERSITY NIJMEGEN   (Netherlands)

Author keywords

[No Author keywords available]

Indexed keywords

CAPITAL FORMATION; DEVELOPMENT STRATEGY; ECONOMIC PERFORMANCE; FOREIGN DIRECT INVESTMENT;

EID: 0030422921     PISSN: 01436597     EISSN: None     Source Type: Journal    
DOI: 10.1080/01436599615281     Document Type: Review

References (68)

1. World Bank, The East Asian Miracle: Public Policy and Economic Growth, New York: Oxford University Press, 1993.
2. A useful recent summary of the basic criticism is given by J. Lele, 'Introduction: situating Asia in the global political economy' in J Lele & K Ofori-Yeboah, eds, Unravelling the Asian Miracle: Explorations in Development Strategies, Geopolitics and Regionalism, Aldershot: Dartmouth, 1996, pp 1-23.
3. S Dodaro, 'Exports and growth: a reconsideration of causality', Journal of Developing Areas, Vol 27, No 2, 1993, pp 227-244. Cf E J Sheehey, 'Exports and growth: a flawed framework', Journal of Development Studies, Vol 27, No 1, 1990, pp 111-116; and E J Sheehey, 'Exports and growth: additional evidence', Journal of Development Studies, Vol 28, No 4, 1992, pp 730-734.
4. S Dodaro, 'Exports and growth: a reconsideration of causality', Journal of Developing Areas, Vol 27, No 2, 1993, pp 227-244. Cf E J Sheehey, 'Exports and growth: a flawed framework', Journal of Development Studies, Vol 27, No 1, 1990, pp 111-116; and E J Sheehey, 'Exports and growth: additional evidence', Journal of Development Studies, Vol 28, No 4, 1992, pp 730-734.
5. S Dodaro, 'Exports and growth: a reconsideration of causality', Journal of Developing Areas, Vol 27, No 2, 1993, pp 227-244. Cf E J Sheehey, 'Exports and growth: a flawed framework', Journal of Development Studies, Vol 27, No 1, 1990, pp 111-116; and E J Sheehey, 'Exports and growth: additional evidence', Journal of Development Studies, Vol 28, No 4, 1992, pp 730-734.
6. Although I am aware of the criticism that has been formulated by several authors regarding the term 'Third World', I will nevertheless use this term as a shorthand and equivalent for 'developing' or 'less developed' countries. For a well founded critique, see: M T Berger, 'The end of the "Third World"?', Third World Quarterly, Vol 15, No 2, 1994, pp 257-275.
7. W Hout & F Meijerink, 'Structures in the international political economy: world system theory and unequal development', European Journal of International Relations, Vol 2, No 1, 1996, pp 47-75.
8. G Gereffi & D Wyman, 'Determinants of development strategies in Latin America and East Asia' in S Haggard & Chung-In Moon, eds, Pacific Dynamics: The International Politics of Industrial Change, Nam-ku: CIS-Inha University; Boulder, CO: Westview Press, 1989, pp 23-52; G Gereffi, 'Paths of industrialization: an overview' in G Gereffi & D L Wyman, eds, Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia, Princeton, NJ: Princeton University Press, 1990, pp 3-31; C I Bradford, Jr, 'Policy interventions and markets: development strategy typologies and policy options', in ibid, pp 32-51; and N Liang, 'Beyond import substitution and export promotion: a new typology of trade strategies', Journal of Development Studies, Vol 28, No 3, 1992, pp 447-472.
9. G Gereffi & D Wyman, 'Determinants of development strategies in Latin America and East Asia' in S Haggard & Chung-In Moon, eds, Pacific Dynamics: The International Politics of Industrial Change, Nam-ku: CIS-Inha University; Boulder, CO: Westview Press, 1989, pp 23-52; G Gereffi, 'Paths of industrialization: an overview' in G Gereffi & D L Wyman, eds, Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia, Princeton, NJ: Princeton University Press, 1990, pp 3-31; C I Bradford, Jr, 'Policy interventions and markets: development strategy typologies and policy options', in ibid, pp 32-51; and N Liang, 'Beyond import substitution and export promotion: a new typology of trade strategies', Journal of Development Studies, Vol 28, No 3, 1992, pp 447-472.
10. G Gereffi & D Wyman, 'Determinants of development strategies in Latin America and East Asia' in S Haggard & Chung-In Moon, eds, Pacific Dynamics: The International Politics of Industrial Change, Nam-ku: CIS-Inha University; Boulder, CO: Westview Press, 1989, pp 23-52; G Gereffi, 'Paths of industrialization: an overview' in G Gereffi & D L Wyman, eds, Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia, Princeton, NJ: Princeton University Press, 1990, pp 3-31; C I Bradford, Jr, 'Policy interventions and markets: development strategy typologies and policy options', in ibid, pp 32-51; and N Liang, 'Beyond import substitution and export promotion: a new typology of trade strategies', Journal of Development Studies, Vol 28, No 3, 1992, pp 447-472.
11. G Gereffi & D Wyman, 'Determinants of development strategies in Latin America and East Asia' in S Haggard & Chung-In Moon, eds, Pacific Dynamics: The International Politics of Industrial Change, Nam-ku: CIS-Inha University; Boulder, CO: Westview Press, 1989, pp 23-52; G Gereffi, 'Paths of industrialization: an overview' in G Gereffi & D L Wyman, eds, Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia, Princeton, NJ: Princeton University Press, 1990, pp 3-31; C I Bradford, Jr, 'Policy interventions and markets: development strategy typologies and policy options', in ibid, pp 32-51; and N Liang, 'Beyond import substitution and export promotion: a new typology of trade strategies', Journal of Development Studies, Vol 28, No 3, 1992, pp 447-472.
12. Cf S Edwards, 'Openness, trade liberalization, and growth in developing countries', Journal of Economic Literature, Vol 31, No 3, 1993, pp 1358-1360, 1371-1373. See also the references to studies by Dodaro and Sheehey in note 3.
13. Cf A de Janvry, The Agrarian Question and Reformism in Latin America, Baltimore, MD: Johns Hopkins University Press, 1981.
14. G A O'Donnell, Modernization and Bureaucratic-Authoritarianism: Studies in South American Politics, Berkeley, CA: Institute of International Studies, University of California, 1972, p 96.
15. P Evans, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil, Princeton, NJ: Princeton University Press, 1979, p 48.
16. The classic formulation is by J Galtung, 'A structural theory of imperialism', Journal of Peace Research, Vol 8, No 1, 1971, pp 83, 89.
17. Eg: K A Bollen, 'World system position, dependency, and democracy: the cross-national evidence', American Sociological Review, Vol 48, No 4, 1983, pp 468-479; E N Muller, 'Dependent economic development, aid dependence on the United States, and democratic breakdown in the Third World', International Studies Quarterly, Vol 29, No 4, 1985, pp 445-469.
18. Eg: K A Bollen, 'World system position, dependency, and democracy: the cross-national evidence', American Sociological Review, Vol 48, No 4, 1983, pp 468-479; E N Muller, 'Dependent economic development, aid dependence on the United States, and democratic breakdown in the Third World', International Studies Quarterly, Vol 29, No 4, 1985, pp 445-469.
19. J A Hobson, Imperialism: A Study, London: Unwin Hyman, 1988.
20. In principle, the observations concern 1965, 1975 and 1985. If data for these years were unavailable, I used figures from preceding or subsequent years.
21. V Bornschier & P Heintz, eds, Compendium of Data for World-System Analysis: A Sourcebook of Data Based on the Study of MNCs, Economic Policy and National Development, Special issue of the Bulletin of the Sociological Institute of the University of Zurich, Zurich: University of Zurich, 1979.
22. Eg: D A Smith & D R White, 'Structure and dynamics of the global economy: network analysis of international trade 1965-1980', Social Forces, Vol 70, No 4, 1992, pp 857-893.
23. R Fiala, 'The international system, labor-force structure, and the growth and distribution of national income, 1950-1980', Sociological Perspectives, Vol 35, No 2, 1992, pp 249-282.
24. Cf L Pritchett, Measuring Outward Orientation in Developing Countries: Can It Be Done? Working Paper 566, Country Economics Department, The World Bank, Washington, DC: World Bank, 1991. Pritchett, who has examined alternative objective measures of outward orientation, reaches the sobering conclusion that these measures 'produce entirely different country rankings' (p 33). In this study I will use a rather straightforward measure - the importance of exports as a percentage of the gross domestic product - which has a high 'face validity'. I have refrained from correcting this measure for structural characteristics of the countries involved, since Pritchett (pp 7-8) has demonstrated that the correlation between the unadjusted and the structure-adjusted trade intensity ratios is generally well above 0.80.
25. Bornschier & Heintz, Compendium of Data for World-System Analysis; World Bank, World Tables 1988-89, Baltimore, MD: Johns Hopkins University Press, 1989.
26. Bradford, Policy interventions and markets', p 37.
27. R Summers & A Heston, 'Improved international comparisons of real product and its composition: 1950-1980', Review of Income and Wealth, Vol 30, No 2, 1984, pp 207-262; R Summers & A Heston, 'A new set of international comparisons of real product and price levels estimates for 130 countries, 1950-1985', Review of Income and Wealth, Vol 34, No 1, 1988, pp 1-25. Data on a variety of indicators (Penn World Table, Mark 4, or PWT4, for the 1950-1985 period) have been provided on three diskettes accompanying the 1988 volume of the Review of Income and Wealth. Although it would be possible to devise a better operationalisation of import substitution on the basis of the 'net effective subsidy rate', Liang has indicated that the cost of collecting data on this variable in multiple countries is 'prohibitive'. See N Liang, 'Beyond import substitution and export promotion', p 459.
28. R Summers & A Heston, 'Improved international comparisons of real product and its composition: 1950-1980', Review of Income and Wealth, Vol 30, No 2, 1984, pp 207-262; R Summers & A Heston, 'A new set of international comparisons of real product and price levels estimates for 130 countries, 1950-1985', Review of Income and Wealth, Vol 34, No 1, 1988, pp 1-25. Data on a variety of indicators (Penn World Table, Mark 4, or PWT4, for the 1950-1985 period) have been provided on three diskettes accompanying the 1988 volume of the Review of Income and Wealth. Although it would be possible to devise a better operationalisation of import substitution on the basis of the 'net effective subsidy rate', Liang has indicated that the cost of collecting data on this variable in multiple countries is 'prohibitive'. See N Liang, 'Beyond import substitution and export promotion', p 459.
29. R Summers & A Heston, 'Improved international comparisons of real product and its composition: 1950-1980', Review of Income and Wealth, Vol 30, No 2, 1984, pp 207-262; R Summers & A Heston, 'A new set of international comparisons of real product and price levels estimates for 130 countries, 1950-1985', Review of Income and Wealth, Vol 34, No 1, 1988, pp 1-25. Data on a variety of indicators (Penn World Table, Mark 4, or PWT4, for the 1950-1985 period) have been provided on three diskettes accompanying the 1988 volume of the Review of Income and Wealth. Although it would be possible to devise a better operationalisation of import substitution on the basis of the 'net effective subsidy rate', Liang has indicated that the cost of collecting data on this variable in multiple countries is 'prohibitive'. See N Liang, 'Beyond import substitution and export promotion', p 459.
30. UNCTAD, Commodity Yearbook, New York: United Nations, 1987 and 1989. Usually, fuel exports are excluded from this kind of analysis, because their inclusion would almost certainly produce outliers that confound the results in a statistically unacceptable way. Moreover, the sometimes erratic price fluctuations in the fuel markets would have a seriously distorting influence on the kind of measurements over time that are attempted in this article.
31. World Bank, World Tables 1988-89.
32. Glenn Firebaugh has argued that both domestic capital formation and foreign direct investment have a positive effect on economic growth, although the latter's effect is smaller than the former's (G Firebaugh, 'Growth effects of foreign and domestic investment', American Journal of Sociology, Vol 98, No 1, 1992, pp 105-130). Dixon and Boswell have refined Firebaugh's analysis by demonstrating that domestic and foreign investment do not only differ with respect to their 'productivity', but that the latter also entails 'negative externalities' (W J Dixon & T Boswell, 'Dependency, disarticulation and denominator effects: another look at foreign capital penetration', American Journal of Sociology, forthcoming).
33. Glenn Firebaugh has argued that both domestic capital formation and foreign direct investment have a positive effect on economic growth, although the latter's effect is smaller than the former's (G Firebaugh, 'Growth effects of foreign and domestic investment', American Journal of Sociology, Vol 98, No 1, 1992, pp 105-130). Dixon and Boswell have refined Firebaugh's analysis by demonstrating that domestic and foreign investment do not only differ with respect to their 'productivity', but that the latter also entails 'negative externalities' (W J Dixon & T Boswell, 'Dependency, disarticulation and denominator effects: another look at foreign capital penetration', American Journal of Sociology, forthcoming).
34. 2 of 35.24 (df = 22, p < 0.05), which means that the model excluding PEN is significantly better than the one including this variable. This result does not imply, however, that the PEN hypothesis - especially in the Dixon/Boswell variant - is not useful in explaining differential productivities and externalities of domestic and foreign investment in developing countries.
35. International Monetary Fund, Balance of Payments Yearbook, Washington, DC: International Monetary Fund, 1968, 1970, 1971 and 1980; International Monetary Fund, Balance of Payments Statistics: Yearbook Part 1, Washington, DC: International Monetary Fund, 1989 and 1990.
36. International Monetary Fund, Balance of Payments Yearbook, Washington, DC: International Monetary Fund, 1968, 1970, 1971 and 1980; International Monetary Fund, Balance of Payments Statistics: Yearbook Part 1, Washington, DC: International Monetary Fund, 1989 and 1990.
37. T Moll, 'Mickey Mouse numbers and inequality research in developing countries', Journal of Development Studies, Vol 28, No 4, 1992, pp 689-704. Cf V A Mahler, 'Income distribution within nations: problems of cross-national comparison', Comparative Political Studies, Vol 22, No 1, 1989, pp. 3-32.
38. T Moll, 'Mickey Mouse numbers and inequality research in developing countries', Journal of Development Studies, Vol 28, No 4, 1992, pp 689-704. Cf V A Mahler, 'Income distribution within nations: problems of cross-national comparison', Comparative Political Studies, Vol 22, No 1, 1989, pp. 3-32.
39. Y W Bradshaw, 'Urbanization and underdevelopment: a global study of modernization, urban bias, and dependency'. American Sociological Review, Vol 52, No 2, 1987, pp 224-239; E L Gidengil, 'Centres and peripheries: an empirical test of Galtung's theory of imperialism', Journal of Peace Research, Vol 15, No 1, 1978, pp. 51-66; B London, 'Structural determinants of Third World urban change: an ecological and political economic analysis', American Sociological Review, Vol 52, No 1, 1987, pp. 28-43; B London & D A Smith, 'Urban bias, dependence, and economic stagnation in noncore nations', American Sociological Review, Vol 53, No 3, 1988, pp 454-463.
40. Y W Bradshaw, 'Urbanization and underdevelopment: a global study of modernization, urban bias, and dependency'. American Sociological Review, Vol 52, No 2, 1987, pp 224-239; E L Gidengil, 'Centres and peripheries: an empirical test of Galtung's theory of imperialism', Journal of Peace Research, Vol 15, No 1, 1978, pp. 51-66; B London, 'Structural determinants of Third World urban change: an ecological and political economic analysis', American Sociological Review, Vol 52, No 1, 1987, pp. 28-43; B London & D A Smith, 'Urban bias, dependence, and economic stagnation in noncore nations', American Sociological Review, Vol 53, No 3, 1988, pp 454-463.
41. Y W Bradshaw, 'Urbanization and underdevelopment: a global study of modernization, urban bias, and dependency'. American Sociological Review, Vol 52, No 2, 1987, pp 224-239; E L Gidengil, 'Centres and peripheries: an empirical test of Galtung's theory of imperialism', Journal of Peace Research, Vol 15, No 1, 1978, pp. 51-66; B London, 'Structural determinants of Third World urban change: an ecological and political economic analysis', American Sociological Review, Vol 52, No 1, 1987, pp. 28-43; B London & D A Smith, 'Urban bias, dependence, and economic stagnation in noncore nations', American Sociological Review, Vol 53, No 3, 1988, pp 454-463.
42. Y W Bradshaw, 'Urbanization and underdevelopment: a global study of modernization, urban bias, and dependency'. American Sociological Review, Vol 52, No 2, 1987, pp 224-239; E L Gidengil, 'Centres and peripheries: an empirical test of Galtung's theory of imperialism', Journal of Peace Research, Vol 15, No 1, 1978, pp. 51-66; B London, 'Structural determinants of Third World urban change: an ecological and political economic analysis', American Sociological Review, Vol 52, No 1, 1987, pp. 28-43; B London & D A Smith, 'Urban bias, dependence, and economic stagnation in noncore nations', American Sociological Review, Vol 53, No 3, 1988, pp 454-463.
43. The variable sectoral inequality has been calculated as follows: the ratio of the gross domestic product of the non-agricultural sectors (as a percentage of total gross domestic product) and the percentage of the total labour force working in these sectors is divided by the ratio of the gross domestic product of the agricultural sector and the percentage of the labour force working in agriculture.
44. United Nations, Yearbook of National Accounts Statistics, Vol II: International Tables, New York: United Nations, 1970 and 1976; United Nations, National Accounts Statistics: Analysis of Main Aggregates, 1987, New York: United Nations, 1990; United Nations, National Accounts Statistics: Main Aggregates and Detailed Tables, 1988, New York: United Nations, 1990; International Labour Organisation, Yearbook of Labour Statistics, Geneva: International Labour Organisation, 1978, 1979, 1980, 1986, 1987 and 1988; International Labour Organisation, Yearbook of Labour Statistics. Retrospective on National Censuses, 1945-89, Geneva: International Labour Organisation. 1990.
45. United Nations, Yearbook of National Accounts Statistics, Vol II: International Tables, New York: United Nations, 1970 and 1976; United Nations, National Accounts Statistics: Analysis of Main Aggregates, 1987, New York: United Nations, 1990; United Nations, National Accounts Statistics: Main Aggregates and Detailed Tables, 1988, New York: United Nations, 1990; International Labour Organisation, Yearbook of Labour Statistics, Geneva: International Labour Organisation, 1978, 1979, 1980, 1986, 1987 and 1988; International Labour Organisation, Yearbook of Labour Statistics. Retrospective on National Censuses, 1945-89, Geneva: International Labour Organisation. 1990.
46. United Nations, Yearbook of National Accounts Statistics, Vol II: International Tables, New York: United Nations, 1970 and 1976; United Nations, National Accounts Statistics: Analysis of Main Aggregates, 1987, New York: United Nations, 1990; United Nations, National Accounts Statistics: Main Aggregates and Detailed Tables, 1988, New York: United Nations, 1990; International Labour Organisation, Yearbook of Labour Statistics, Geneva: International Labour Organisation, 1978, 1979, 1980, 1986, 1987 and 1988; International Labour Organisation, Yearbook of Labour Statistics. Retrospective on National Censuses, 1945-89, Geneva: International Labour Organisation. 1990.
47. United Nations, Yearbook of National Accounts Statistics, Vol II: International Tables, New York: United Nations, 1970 and 1976; United Nations, National Accounts Statistics: Analysis of Main Aggregates, 1987, New York: United Nations, 1990; United Nations, National Accounts Statistics: Main Aggregates and Detailed Tables, 1988, New York: United Nations, 1990; International Labour Organisation, Yearbook of Labour Statistics, Geneva: International Labour Organisation, 1978, 1979, 1980, 1986, 1987 and 1988; International Labour Organisation, Yearbook of Labour Statistics. Retrospective on National Censuses, 1945-89, Geneva: International Labour Organisation. 1990.
48. United Nations, Yearbook of National Accounts Statistics, Vol II: International Tables, New York: United Nations, 1970 and 1976; United Nations, National Accounts Statistics: Analysis of Main Aggregates, 1987, New York: United Nations, 1990; United Nations, National Accounts Statistics: Main Aggregates and Detailed Tables, 1988, New York: United Nations, 1990; International Labour Organisation, Yearbook of Labour Statistics, Geneva: International Labour Organisation, 1978, 1979, 1980, 1986, 1987 and 1988; International Labour Organisation, Yearbook of Labour Statistics. Retrospective on National Censuses, 1945-89, Geneva: International Labour Organisation. 1990.
49. Cf D C Shin, 'On the third wave of democratization: a synthesis and evaluation of recent theory and research', World Politics, Vol 47, No 1, 1994, pp. 147-148.
50. R D Gastil, Freedom in the World: Political Rights and Civil Liberties 1978, New York: Freedom House; Boston: G K Hall, 1978; R D Gastil, 'The comparative survey of freedom 1985', Freedom at Issue, No. 82, 1985, pp 3-16; and K A Bollen, 'Issues in the comparative measurement of democracy', American Sociological Review, Vol 45, No 3, 1980, pp. 370-390.
51. R D Gastil, Freedom in the World: Political Rights and Civil Liberties 1978, New York: Freedom House; Boston: G K Hall, 1978; R D Gastil, 'The comparative survey of freedom 1985', Freedom at Issue, No. 82, 1985, pp 3-16; and K A Bollen, 'Issues in the comparative measurement of democracy', American Sociological Review, Vol 45, No 3, 1980, pp. 370-390.
52. R D Gastil, Freedom in the World: Political Rights and Civil Liberties 1978, New York: Freedom House; Boston: G K Hall, 1978; R D Gastil, 'The comparative survey of freedom 1985', Freedom at Issue, No. 82, 1985, pp 3-16; and K A Bollen, 'Issues in the comparative measurement of democracy', American Sociological Review, Vol 45, No 3, 1980, pp. 370-390.
53. A Inkeles, Introduction: on measuring democracy', Studies in Comparative International Development, Vol 25, No 1, 1990, pp 3-6.
54. International Monetary Fund, Balance of Payments Yearbook, 1968, 1970, 1971, 1980; and International Monetary Fund, Balance of Payments Statistics: Yearbook Part 1, 1989, 1990.
55. International Monetary Fund, Balance of Payments Yearbook, 1968, 1970, 1971, 1980; and International Monetary Fund, Balance of Payments Statistics: Yearbook Part 1, 1989, 1990.
56. World Bank, World Tables 1988-89; and World Bank, World Tables 1993, Baltimore, MD: Johns Hopkins University Press, 1993.
57. World Bank, World Tables 1988-89; and World Bank, World Tables 1993, Baltimore, MD: Johns Hopkins University Press, 1993.
58. See K G Jöreskog & D Sörbom, LISREL 7: A Guide to the Program and Applications, Chicago: SPSS, 1989, pp 119-123.
59. Hout & Meijerink, 'Structures in the international political economy'.
60. C Chase-Dunn, Global Formation: Structures of the World-Economy, Oxford: Basil Blackwell, 1989.
61. K A Bollen. Structural Equations with Latent Variables, New York: John Wiley & Sons, 1989.
62. Hout & Meijerink, 'Structures in the international political economy', pp 64-65.
63. Cf C Suter, Debt Cycles in the World-Economy: Foreign Loans, Financial Crises, and Debt Settlements, 1820-1990, Boulder, CO: Westview Press, 1992, p 186.
64. In order to use the maximum of information that is present in the data, I have applied pairwise deletion of missing data. Because this can result in unstable results - since the number of cases on which the correlations in the correlation matrix are based will not be constant - all analyses have been repeated with listwise deletion of missing data. On the whole, the results of both procedures differed only in degree. Therefore, the presentation of results is limited to the analyses with pairwise deletion of missing data.
65. See the references in note 6 above.
66. See notes 3 and 7 above.
67. Bornschier & Chase-Dunn, Transnational Corporations and Underdevelopment, pp 50-51.
68. The results of this analysis are summarised in note 25.