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East Asia and Eastern Europe in a Globalized Perspective

Lessons from Korea and Estonia

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Edited By Bernhard Seliger, Jüri Sepp and Ralph Wrobel

This book compares development experiences from South Korea and Estonia, which are both very successful examples of development within their region. The development experience of states in the 20 th century offers a bewildering variety and often downright contradicting models, which nevertheless led to catching-up and rapid growth rates, leaving policy-makers in countries trying to emulate such models at a loss. Over time and through various crises on the regional and worldwide level, the experience of East Asian states became increasingly an interesting object of study. This was related to the successful long-term growth experience of countries like South Korea, but also to successful models of state transformation, which, though in a different political setting, achieved high growth rates without the deep transformation recession typical for European transformation states.
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The Decomposition of Productivity Gap between Estonia and Korea

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1.  Introduction

Estonia and the Republic of Korea (or South Korea) are both in a similar situation in terms of future economic challenges – there is a need to close the development gap between them and the world’s richest. Both countries have so far been quite successful in this respect, though Korea has gained a considerable head start compared to Estonia since it began that chase more than a decade earlier1. Statistics reveal that over the past decade the two countries have been able to significantly reduce their backlog from the average per capita gross national income (GNI) of OECD countries (Figure 1). In 2002 the GNI of Estonia and Korea were 45% and 76% from OECD average respectively, whereas by the year 2011 the corresponding figures had been increased to 58% and 87% – an increase of 13 and 11 percentage points. It is noticeable that the race of catching up is taking place in somewhat different race classes as Estonia is currently trying to reach to a level where Korea was already a decade ago. However, the statistical ratios reveal that some convergence has occurred – the level of Estonian gross national income relative to Korea has risen from 59% to 67%. In absolute figures, net national income per person was 26425 USD in Korea and 17616 USD in Estonia (in PPP terms) in 2011.

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