Premature Welfare State: Its
implication on poverty in East Asia
November, 2019 in Beijing

Osaka City University
Goishi Norimichi1. Research question
2. “Premature deindustrialization” is true?
3. Development of welfare system in lateindustrialized and industrializing countries is weak?
4. Impact of “premature deindustrialization” onpoverty or poverty policies
5. Then, what can be done?

Manufacturing is the engine of growth (Kaldor 1966; Chenery,Robinson, and Syrquin 1986)

Developing countries are turning into service economies without
having gone through a proper experience of industrialization. I callthis “premature deindustrialization”(Rodrik, 2016).

The path to prosperity through industrialization may have become
more difficult(Jesus Felipe, Aashish Mehta, and Changyong Rhee,2014).

Research Question
Welfare system has been developed in tandem withindustrialization during nearly one century in western European
countries.

If “premature deindustrialization” is true, development ofwelfare system in late industrialized and industrializing countries
will be weak and must take a different path from western-stylesystem.

What is the impact of “premature deindustrialization” onpoverty or poverty policies in East Asian countries?

“Premature deindustrialization” is true?

Share of Employment in Industry (% of total employment)（％）

Developing Countries

Advanced Countries

（％）

China

1990

2000

2010

Japan

Korea

1960

1980

2000

Source: For developing countries, ILOSTAT https://ilostat.ilo.org/, and for advanced
countries, OECD Data, Employment by activity, https://data.oecd.org/emp/employmentby-activity.htm.

Maximum Employment Share of Industry

Japan

Korea
China
Source: For developing countries, ILOSTAT https://ilostat.ilo.org/, and for advanced
countries, OECD Data, Employment by activity, https://data.oecd.org/emp/employmentby-activity.htm.

Over 30 percent employment share in industry during
more than 70 years

Source: Joan R. Roses and Nikolaus Wolf, Regional Economic Development in Europe, 19002010: A Description of the patters, LSE Economic History Working Papers, no. 278, 2018.

Blessing Chiripanhura and Nikolas Wolf, Long-term trends in UK employment: 1861 to 2018,https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/compendium/econo
micreview/april2019/longtermtrendsinukemployment1861to2018

Development of welfare system in lateindustrialized and industrializing countries
is weak?

Gini Coefficients with Market and Disposal Income (38 countries)

Source: OECD Income Distribution Database, https://www.oecd.org/social/incomedistribution-database.htm

Real Income and Improvement Rate of Income Distribution by Tax and Social Transfer

SwedenImprovement Rate (%)

Germany
SwedenJapan

UKUSKorea
Real per capita income (2011US$)
Source: OECD Income Distribution Database and Penn World Table version 9.1

Impact of “premature deindustrialization”
on poverty or poverty policies

socialweak labor union, weak bargaining power of labor ->dualism in labor market, wage inequality

policydualism or fragmentation of social insurance-> low coverage of employee’s social insurance
weak liberal parties in politics-> low social expenditure, weak redistribution

East Asia
Public pension is sustainable ?
-> future uncertainty, generational conflict

Then, what can be done ?

1. Improvement of fragmentation in labor markets and socialinsurance

2. Tax-funded allowance rather than social insurance

3. Out-reach activities to find and support needy people in thecommunity. This is getting more and more important because oflow coverage of benefitsThank you !