GROWTH IN DEVELOPING-COUNTRIES - LESSONS FROM EAST-ASIAN COUNTRIES - THE OPTIMAL DEGREE OF COMPETITION AND DYNAMIC EFFICIENCY IN JAPAN AND KOREA

This paper is concerned with the neglected role of competition policy in East Asian development. Michael Porter considers Japan's developmen t to have benefitted from intense competition among firms. By contrast , Caves and Uekusa criticize MITI's role in creating recession cartels and entry barriers, which are thought to have resulted in allocative inefficiency. This paper argues that competition policy in both Japan and Korea was oriented towards creating dynamic efficiency (the highes t long term productivity growth rate). It did so by measures, operatin g at both the industry and firm level, which sometimes restricted comp etition and sometimes encouraged it.