The new structural economics: patient capital as a comparative advantage

Justin Yifu Lin, Yan Wang

Abstract


The world economy needs a growth-lifting strategy, and infrastructure financing seems to hold the key. Based on the New Structural Economics (Lin, 2010; 2012) we discuss the heterogeneity of capital focusing on the long-term versus short-term orientation (STO). Traditional neoliberalism assumes that capital is homogenous, complete capital account liberalization is “beneficial”.
However, previous studies have found evidence of long-term orientation (LTO) in the culture of many Asian economies (Hofstede, 1991). In this exploratory paper, we suggest that the LTO can be considered a special endowment which, under certain circumstances, can be developed into a comparative advantage (CA) in patient capital. If these countries can turn their latent CA into a
revealed CA in patient capital, and develop the ability to “package” profitable and non-profitable projects in meaningful ways, they would have a “revealed” competitive advantage in infrastructure financing. The ability to “package” public infrastructure and private services is one of the key institutional factors for success in overseas cooperation.


Keywords


patient capital; long-term orientation; infrastructure financing; development

Full Text:

PDF

References


Aschauer DA (1989). "Back of the G-7 pack: Public investment and productivity growth in the Group of Seven". Working Paper Series, Macroeconomic Issues, 89–13, Federal Reserve Bank of Chicago.

Bai CE, Hsieh CT and Qian Y (2006). “The Return to Capital in China”. NBER Working Paper No. 12755.

Broner F and Ventura J (2016). “Rethinking the Effects of Financial Globalization”. Quarterly Journal of Economics, 131(3): 1497–1542. doi: 10.1093/qje/qjw010.

Bureau of Economic Analysis (2017). National Income and Product Accounts Gross Domestic Product: Fourth Quarter and Annual 2016 (Second Estimate). US: BEA. https://www.bea.gov/ newsreleases/national/gdp/2017/gdp4q16_2nd.htm.

Calderón C (2010). “Infrastructure and Economic Development in Sub-Saharan Africa”. Journal of African Economies, 19(suppl. 1): i13-i87. doi: 10.1093/jae/ejp022.

_____, “Infrastructure in Latin America”. In Handbook of Latin American Economics, J. Ocampo, Oxford University Press, London.

Calderón C (2011). “Is infrastructure capital productive? A dynamic heterogeneous approach”. World Bank Policy Working Papers 5682.

Canning D and Bennathan E (2000). “The Social Rate of Return on Infrastructure Investments”. World Bank Working Papers WPS 2390.

Chandra V, Lin JL and Wang Y (2012). “Leading Dragons Phenomenon: New Opportunities for Catch-Up in Low-Income countries”, WB Policy Research Working Paper 6000.

Chen C (2013). “South-South Cooperation in Infrastructure in Sub-Saharan Africa”. Working Paper for ECOSOC.

Dollar D (2016). “China as a Global Investor”. Brookings Institution. https://www.brookings.edu/.../ China-as-a-Global-Investor.

Estache A (2011). “Infrastructure Finance in Developing Countries: An Overview”. EIB publication.

Foster V and Briceño-Garmendia C (2010). “Africa’s Infrastructure: A time for transformation”. The World Bank, Washington DC.

Galor O and Özak Ö (2016). “The Agricultural Origins of Time Preference”. American Economics Review, 106(10): 3064–3103. doi: 10.1257/aer.20150020.

Gou Q, Yiping H and Jianguo X (2010). “Capital account liberalization and economic growth revisited: Different effects of inflow and outflow liberalization”. Working Paper, National School of Development, Peking University.

Guasch JL (2004). “Granting and Renegotiating Infrastructure Concessions: Doing It Right”. The World Bank, Washington, DC.

Halland H, John B, Bryan L, et al. (2014). “Resource Financed Infrastructure: A discussion on a new form of infrastructure financing” The World Bank, Washington DC.

Hofstede G (1991). “Cultures and Organizations: Software of the Mind”, McGraw-Hill, London.

Hofstede G, Gert JH and Michael M (2010). Cultures and Organizations: Software of the Mind. Revised and Expanded 3rd Edition. New York: McGraw-Hill USA.

IMF (2014). World Economic Outlook, Chapter 3 on Infrastructure, Washington DC. www.imf.org/ external/pubs/ft/weo/2014/02/pdf/c3.pdf .

Ju J, Lin JF and Wang Y (2015). “Endowment Structures, Industrial Dynamics, and Economic Growth”. Journal of Monetary Economics, 76: 244–263. doi: 10.1016/j.jmoneco.2015.09.006.

Kapur B (2016). “Global Financial Imbalances and Endogenous Growth in a North-South Setting”. Working Paper, National University of Singapore.

Kose A, Eswar P, Kenneth R, et al. (2009). “Financial Globalization: A Reappraisal”. IMF Staff Papers, 56(1): 8–62. doi: 10.1057/imfsp.2008.36.

Kukharskyy B (2016). “Relational Contracts and Global Sourcing”. Journal of International Economics, 101: 123–147. doi: 10.1016/j.jinteco.2016.04.002.

Lin JY (2009). “Beyond Keynesianism: The Necessity of a Globally Coordinated Solution”. Harvard International Review, 31(2): 14–17.

_____ (2010). “New Structural Economics: A Framework for Rethinking Development”. Policy Research Working Paper 5197, World Bank, Washington, DC.

_____ (2011a). “New Structural Economics: A Framework for Rethinking Development”. World Justin Yifu Lin and Yan Wang

Bank Research Observer, 26(2): 193–221. doi: 10.1093/wbro/lkr007.

_____ (2011b). “Global Crisis Requires Global Solutions”. Speech prepared for the Council on Foreign Relations, New York (February 28).

_____ (2011c). “A Pro-Growth Response to the Crisis”. Intereconomics: Review of European Economic Policy, 46 (6): 321–326.

_____ (2011d). “Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change”. Development Policy Review, 29 (3): 264–290.

_____ (2012). The Quest for Prosperity: How Developing Economies Can Take Off. Princeton, NJ: Princeton University Press.

_____ (2012b). New Structural Economics: A Framework for Rethinking Development and Policy. Washington, DC: World Bank.

_____ (2012c). “Building Infrastructure for a Brighter Future: How infrastructure investment initiative can generate growth and create jobs in the developed world”. Article for Foreign Policy.

_____ (2013). Against the Consensus: Reflections on the Great Recession. Cambridge, UK: Cambridge University Press.

_____ (2015a). “The Washington Consensus revisited: A new structural economics perspective”. Journal of Economic Policy Reform, 18(2): 96–113. doi: 10.1080/17487870.2014.936439.

_____ (2015b). “Why I Do Not Support Complete Capital Account Liberalization”. China Economic Journal, 8(1): 86–93. doi: 10.1080/17538963.2015.1002178.

Lin JY and Lu K (2014). “Infrastructure’s Class of Its Own”. Project Syndicate. https://www. project-syndicate.org/commentary/justin-yifu-lin-and-kevin- lu-argue-that--to-attract-privateinvestment--infrastructure-must-be-redefined-as-a-new-asset-class?barrier=accessreg

Lin JY and Monga C (2011). “Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change”. Development Policy Review, 29 (3): 264–90.

Lin JY and Wang Y (2013). “Beyond the Marshall Plan: The Global Structural Transformation Fund (GSTF)”. A paper for the UN’s Post-2015 development agenda, May 2013. http://www. post2015hlp.org/wp-content/uploads/2013/05/Lin Wang_Beyond-the-Marshall-Plan-AGlobal-Structural Transformation-Fund.pdf.

Lin JY and Wang Y (2014). “Comments” in Halland, Havard, John Beardsworth, Bryan Land,

and James Schmidt. Resource Financed Infrastructure: a discussion on a new form of

infrastructure financing. The World Bank, Washington DC. p. 75–78.

Lin JY and Wang Y (2017). Going Beyond Aid: Development Cooperation for Structural Transformation. Cambridge University Press. doi: 10.1017/9781316597354.

Lin JY, Lu K and Cledan MP (2015). “New Equities for Infrastructure Investment”. Project Syndicate. investment-asset-class-by-justin-yifu-lin-et-al-2015-03?barrier=accessreg.

Lu K and Lin JY (2013). “To Finance the World’s Infrastructure, We Need a New Asset Class”. The World Post, A Partnership of the Huffington Post and Berggruen Institute. http://www.

huffingtonpost.com/kevin-lu/world-bank-global-infrastructure-facility_b_4078840.html.

Mendoza EG, Quadrini V and Rios-Rull JV (2009).“Financial Integration, Financial Development, and Global Imbalances”. Journal of Political Economy, 117(3): 371–416.

OECD (2015). Infrastructure Financing Instruments and Incentives. The project is under Secretary General of the OECD. Paris

Ostry J, Loungani P and Furceri D (2016). “Neoliberalism Oversold?”. Finance and Development. June 2016, 53(2). http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm

Peterson GE (2008). “Unlocking Land Values to Finance Urban Infrastructure: Land-based financing options for cities”. Trends and Policy Options Series, Washington DC. doi: 10.1596/978-0-8213-7709-3.

Spence M (2008). “The Growth Report: Principal Findings and Recommendations”.

Stiglitz JE (2016). “A Nobel Laureate Explains How Trump Could Nuke the Economy”. Vanity Fair. http://www.vanityfair.com/news/2016/12/a-nobel-laureate-explains-how-trump-could-nukethe-economy.

Tang XY (2014). “China-Africa Economic Diplomacy and Its Implication to Global Value Chain”. (In Chinese), World Knowledge Publishers Beijing, September 2014, p. 81–88.

Wang Y (2011). “Infrastructure: The Foundation for Growth and Poverty Reduction: A Synthesis” Chapter III in Volume II, Economic Transformation and Poverty Reduction: How it happened in China, helping it happen in Africa, China-OECD/DAC Study Group.

World Bank (2012). “Global Economic Prospects: Uncertainties and Vulnerabilities”. The World Bank, Washington, DC.

_____ (2012), “Chinese FDI in Ethiopia”. A World Bank Survey.

_____ (2011), “Supporting Infrastructure Development in Low-Income Countries”. The World Bank, Washington, DC.

Xinhua (2013). “Xi suggests China, C.Asia build Silk Road economic belt”. September 7, 2013.

Xu QY (2016). “CDB: Born Bankrupt, Born Shaper”. Working Paper. Chinese Academy of Social Sciences, December 2016.

Yusuf S (2013). Five cities going green: how are they doing it? Growth Dialogues. http://www. growthdialogue.org/sites/default/files/publication/documents/GreenGrowth_web_3_27_13. pdf.

Zeng DZ (2010). “An Assessment of Six Economic Zones in Nigeria, in Farole, Thomas, Special Economic Zones in Africa: Comparing Performance and Learning from Global Experience”.

The World Bank, Washington DC




DOI: http://dx.doi.org/10.24294/jipd.v1i1.28

Refbacks

  • There are currently no refbacks.


Copyright (c) 2017 Justin Yifu Lin and Yan Wang

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Creative Commons License
This site is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.