Relation-Based Versus Rule-Based Governance: An Explanation of the East Asian Miracle and Asian Crisis

23 Pages Posted: 12 Oct 2003

See all articles by John Shuhe Li

John Shuhe Li

SAP AG - Global Support Center (GSC)

Abstract

The paper aims to establish a theory of relation-based governance to explain both the "East Asian miracle" and the Asian crisis. The author first defines "relation" and "relation-based governance" in terms of information and enforcement, and then analyzes the nature and dynamics of relation-based governance, comparing its benefits and costs with that of "rule-based governance" in terms of observability/verifiability, commitment, and transaction costs. The theory is applied to examine a particular relation-based governance system - the Japanese model - to explain both the East Asian miracle and the Asian crisis. The framework provides foundations for studies of East Asian catching-up and economic development in general.

Suggested Citation

Li, John Shuhe, Relation-Based Versus Rule-Based Governance: An Explanation of the East Asian Miracle and Asian Crisis. Available at SSRN: https://ssrn.com/abstract=450973

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