Question

what were the policies that led the so-called Tiger economies to be able to transform themselves from having a labor-based comparative advantage to a capital-based comparative advantage?

Answer 1

Tiger economies are also known as the Asian Dragons are economies of Hong Kong,Singapore,Taiwan and South Korea.These economies were rich in literacy level,infrastructure,established ports already.Tiger economies were having a advantage with respect to labor.

The policies that led these economies to transform themselves from labor to capital based comparative advantage are:

1.After world war II when there began peace these countries started to take good opportunity of this situation to create healthy relation with other countries to trade by using their inexpensive labor with proper education.Very soon with these labors they created a huge number of products and services and were on high demand.

2.South Korea's GDP was low.To increase GDP the economy started to shift itself from agricultural based economy to capital based export oriented economy . It started to gain from the industries where it has comparative advantage like software development,robotics,electronics ,ship building, car, steel etc.Due to this policy the GDP rate grew steadily.

3.Hong Kong started to encourage its inexpensive labor.Many companies started to invest in Hong Kong as they found beneficial to invest in Hong Kong as tax incentive was there.Due to this construction begin in Hong Kong.Construction of Public Housing,Sky scrapper,train started.

4.Technological advancement and economic freedom in these economies also started to make that economy into a capital based economy gradually.

5.Japanese colonial rule also benefitted these economies in terms of education.Education is one of the key factor to make these economies better as a human capital and labor.