| This dissertation consists of three essays. The first, "Modeling: the Effects of Preferential Regional Policies in Developing Countries," develops a framework to determine the utility of special economic zones (SEZs) in less-developed regions. Although neo-classical economic theory cannot justify subsidization and extension of preferential conditions to these concentrated regions within a national economy, this essay shows that if there exist some type of positive externalities, regional spillovers or linkages between firms in a region, establishment of a SEZ can stimulate development and may be preferable to free trade and uniform opening of the economy.;The second essay, "Hong Kong: The Fragile Economy of Middlemen," presents a model to address the role of well-informed intermediaries in a dynamic world containing imperfectly informed agents. The model is applied to examine trade relations between China and the rest of the world, with Hong Kong playing a middleman role. Results indicate that middleman trade is essential to the modernization of the Chinese economy, yet, notwithstanding sincere intentions in both Beijing and Hong Kong, subtle changes may deny Hong Kong its irreplaceable catalyst role, possibly leaving China to ultimate technical stagnation.;The final essay, "Borrowing to Finance Industrialization: A Model for the Successes and Failures of Big Push Development Strategies," develops a model to describe the effects of government intervention in financial markets of a small developing economy in a world with internationally mobile capital. It is shown that government has the potential to play a positive role in stimulating development and facilitating the economy's escape from a poverty trap. At the same time policy miscalculations may be made because of uncertainty in world market conditions or due to international competition among nations aspiring to industrialize. In these cases implementation of big push industrialization strategies may prove to be unsuccessful, resulting in large foreign debts and uncompetitive domestic industries. This analysis provides insights into the system which lead to the recent financial crisis in East Asia, as well as the relationship between that crisis and big push development policies which motivated governments and financial institutions in the region. |
