The Benefits and Costs of Relation-Based Governance: An Explanation of the East Asian Miracle and Crisis

41 Pages Posted: 17 Mar 2000

See all articles by Shuhe Li

Shuhe Li

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Date Written: October 20, 1999

Abstract

This paper aims to establish a theory of relation-based governance to explain both the "East Asian miracle" and the East Asian crisis. I first define "relation" and "relation-based governance" in terms of information and enforcement. I then analyze the nature and dynamics of relation-based governance, and compare its benefits and costs with that of "rule-based governance" in terms of observability/verifiability, commitment, and transaction costs. Finally, I apply the theory to examine a particular relation-based governance system-the Japanese model-to explain both the East Asian miracle and the crisis. Our framework provides foundations for studies of East Asian catching-up and economic development in general.

Keywords: crisis, East Asia, governance, relation, rule

JEL Classification: D23, G30, K12, K42, L14

Suggested Citation

Li, Shuhe, The Benefits and Costs of Relation-Based Governance: An Explanation of the East Asian Miracle and Crisis (October 20, 1999). Available at SSRN: https://ssrn.com/abstract=200208 or http://dx.doi.org/10.2139/ssrn.200208

Shuhe Li (Contact Author)

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
+11 852-278-87298 (Phone)
+11 852-278-88806 (Fax)

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