Tyranny of numbers

Seoul impressions

Posted in General by Djavad on October 14, 2009

This is my first, and long overdue, visit to Korea.  I have wanted to see Korea up close for a long time because this country occupies a special place in my education as a development economist.  When I was in graduate school in the 1970s, Korea was a poor developing country, and behind Iran in income per capita.  Now its income per capita is more than twice that of Iran and in many respects a developed country–a world apart from where Iran is today. How delightful to visit it now, three decades since we debated its fate pessimistically concluding that it could not could prosper while in the imperialist orbit.  Its infrastructure is well developed, its capital city is clean and spacious, and its internet network is better than in the US.  

It is natural to be here and wonder why Iran lost the race to Korea.  We had a better growth performance in the 1960s, but it fizzled out in the 1970s while theirs continued tripling incomes every generation.  We are now where we where in the 1970s, but they have broken the underdevelopment barrier. 

If it is any consolation, while in the 1970s Iranians had higher income per capita than Koreans, in other important respects they were behind–perhaps did not even have a chance in the development race.  Their average education was much higher than Iran’s (about three times) and their fertility was on its way down while fertility transition in had hardly begun.  (Now their young are more educated than Ameircans!) So, if you buy the Becker-Lucas view of economic growth, at the time we had not started on the path to modern economic growth while Korea was well on its way (you can read a succinct explanation of this view by Lucas here).

There are interesting contrasts between life in Seoul and Tehran that is hard to miss even with a short visit like mine.  Koreans in the street and at work seem generally satisfied, as if they are where they want ot be on at least they are on the right path.  By contrast Iranians are happier in their homes than on their jobs, as if they ought to be doing something else.  I get the impression that Koreans suffer less from envy and less concerned about who’s got what than Iranians.  I am not sure if this is a hard-wired cultural trait or a product of circumstances that the two peoples find themselves in.  But it is hard not to think that Koreans’ focus on hard work to get ahead and our concern with redistribution may explain why they have gone far while, economically speaking, we have been chasing our tail for the past several decades.

One interesting contrast in between the economic professions in the two countries.  Korean economists are busy connecting to the world and some of their best graduates from the US have chosen to return to Korea.  There is conscious investment in building the profession.  Salaries are competitive with the US and incentive for publication re strong.  Publishing in an international journal can bring anywhere from $5,000 to $30,000 per article depending on the journal quality.

The small conference I have been attending here is also part of this effort.  It brought many of their labor economists together with a few from the US (including a co-editor of the American Economic Review).  Building these connections are expensive but it helps their faculty get in touch with those who are likely to review their papers for publication.  It also helps their graduate students get a foot in the door.  Recommendation letters from faculty they know have a much greater impact than from unknown faculty.  The best Korean students  know that an 800 score in GRE does not get them very far, so as undergraduates they try to impress their professor and in the process they acquire interest in doing research and a good attitude to go with it–creativity, honesty, persistence and teamwork .  As a result, admitting students from Korea is much less of a gamble now than it used to be, and much less so compared to Iran.  After all, because of all the important traits I mentioned, conditional on a high GRE, the performance of foreign graduate students is still highly variable.  This variance is greatly reduced when they are recommended by a colleague you know and trust.

8 Responses

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  1. Hamed Gh said, on October 25, 2009 at 5:48 am

    Dear Djavad,

    I remember a paper in World Development (unfortunately not the exact spec) some years ago which argued that colonial effect by Japanese was an important factor in Korean development. As you also pointed out, the paper mentions huge investment in educational infrastructure back to early 20th century and so on, based on these facts I thought that there was a development infrastructure already built in Korea years before they took off and hence the full picture is not limited to a contrast between Iran/Korea at 60s but also includes 10s and 20s.


    • dsalehi said, on October 27, 2009 at 9:31 am

      Thanks for noting the article on Korea-Japan hisotry. The Koreans I talk to have a love-hate relationship with Japan. They acknolwedge their contribution to physical infrastructure but dislike how the Japanese looked down upon Koreans. Japanese investment in educating Koreans would fit this type of relationship.

  2. Mohammad said, on October 24, 2009 at 1:27 pm

    Dear Prof. Salehi, we’ll love to read your opinion about the ongoing “targeted subsidizing” issue. After all, as far as I know, this is exactly related to your area of expertise!
    Specifically, what would this bill probably lead to? Will the redistribution of subsidies lead to higher welfare for the poor? (both in the short run and in the long run)

    • dsalehi said, on October 27, 2009 at 9:32 am

      Thanks for asking. I intend to write something on subsidies soon.

  3. amirhossein said, on October 23, 2009 at 5:44 am

    I think our problem is not just an economic one, or just cultural or any other just!, it’s completely mixed.
    when you look at our history you can find out we always have the same problems. We had a discussion weeks ago in our class, we discussed why we need safety and security an why we need justice? we conclude that safety is necessary for living and justice is necessary for growing and development. but because of the rich resources we always had and the fight for these resources, we, even our intellectual and educated society, accept being safe and being alive and accept the government that can do this for us. so that we’ve never asked for justice and then we’ve never had continuous development.
    it’s the one from million. i think this subject has a really great potential to work on.

    • dsalehi said, on October 27, 2009 at 9:37 am

      Economics and culture are not as separate as you think. For example, the obsession of Iranians with distribution may be linked to the instiutions of sharecropping that formed the foundation of Iran’s economy for centuries. Thinking loud, under shrecropping, distribution more than growth affects individual welfare. The arrival of big oil money in the last fifty years may have reignited the obsession with distribution. I agree, ultimately a change in culture will be necessary to change the current fixation with redistribution.

  4. محمد said, on October 18, 2009 at 3:42 am

    We made a bad mistake somewhere in our history: in revolution, Iraq war or after that. We’re not sure where it was, bat we’re sure that we did it. Now it’s the time to retrieve.

    • dsalehi said, on October 19, 2009 at 9:39 am

      I am sure we made several mistakes, but, as I point out in this post, some of these “mistkes” probably ocurred long before the race for modern economic growth began in the 1960s. Iran’s initial conditions were unfavorable relative to South Korea– low education and high fertility which persisted into the 1980s while Korea had made these transitions in the 1960s.

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