Regional perspectives - South korea Flashcards
what has SK growth been like
- starkest transition out of poverty
- immense growth from second half of 20th
- first half of 20th century was same level as Ghana GDPpc
- rapid increase in GDPpc
what has been the main force behind SK economic growth
- industrial policy
structural transformation
- drop in agriculture share
- increase in manufacturing and tertiary sector
what has SK grown in spite of
- korean war
- ww2
- lack of natural resources = geography
- high population density
what are the fundamentals that have played a role
- industrial policy
- openness
- institutions
- culture
what was paks goal
export led industrialisation
- 1970s = focusing on heavy and chemical industries
what were the industrial policies used to develop HCI
- tariffs
- export-led subsidies
- providing cheap and easy access to credit
what is the effect of introducing tariffs
- decrease imports
- raise the price faced by consumers
- producers can make more profit
what is the effect of export subsidies
- increases exports
- raise the price that exporters receive
how did SK help facilitate growth of
heavy and chemical industries HCI
- directed credit
- reduce frictions in access to capital
- targeting credits for investment in HCI
- preferential IR to fund exports and investment
- loans for buying equipment
lane (2019)
what were they testing
were the policies targeted at promoting growth in HCI industries effective?
how do you overcome endogeneity problem
make sure you get a causal effect
use diff in diff
* to get causal effects due to the policy
* without capturing the effects of other policies
- issue of policy was targeted at industries that were already doing better
lane (2019)
what did they do
- compares outcomes in manufacturing between HCI (targeted) and non-HCI (control)
- treatment = received loans from korean bank - more access to credit
- diff in diff
- parallel trend assumption
lane (2019)
what did they find
- after the policy treatment group has more:
- more inputs and capital
- spend more on inputs
- acquire more capital
- acquire more buildings
- acquire more machinery
- large significance in value of exports for these targeted industries
lane (2019)
what was the effect of policies on productivity - TFP growth
- increased value of exports
- increased labour productivity
- output prices fall (more efficient)
did industrial policy of HCI have any spillover effects
- no effect on firms selling to HCI = backward linkage
- forward linkage effect = firms buying from HCI benefit from cheaper prices
