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Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea

Author

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  • Nathan Lane

    (University of Oxford)

Abstract
I study the impact of industrial policy on industrial development by considering a canonical intervention. Following a political crisis, South Korea dramatically altered its development strategy with a sector-specific industrial policy: the Heavy and Chemical Industry (HCI) drive, 1973-1979. With newly assembled data, I use the sharp introduction and withdrawal of industrial policies to study the impacts of industrial policy — during and after the intervention period. I show (1) HCI promoted the expansion and dynamic comparative advantage of directly targeted industries. (2) Using variation in exposure to policies through the input-output network, I show HCI indirectly benefited downstream users of targeted intermediates. (3) I find direct and indirect benefits of HCI persisted even after the end of HCI, following the 1979 assassination of the president. These effects include the eventual development of directly targeted exporters and their downstream counterparts. Together, my findings suggest that the temporary drive shifted Korean manufacturing into more advanced markets and created durable industrial change. These findings clarify lessons drawn from South Korea and the East Asian growth miracle.

Suggested Citation

  • Nathan Lane, 2021. "Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea," SoDa Laboratories Working Paper Series 2021-10, Monash University, SoDa Laboratories.
    • Handle: RePEc:ajr:sodwps:2021-10
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    References listed on IDEAS

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    More about this item

    Keywords

    industrial policy; East Asian miracle; economic history; industrial development; Heavy-Chemical Industry Drive;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • N6 - Economic History - - Manufacturing and Construction

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