Protecting Small-Scale Enterprises: Evidence from the Korean Ready-Mixed Concrete Industry

Hyunbae Chun (), Hailey Hayeon Joo, Jisoo Kang () and Soo Hyung Kim ()
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Hyunbae Chun: Sogang University
Jisoo Kang: Korea Culture and Tourism Institute
Soo Hyung Kim: Korea Labor Institute & Sogang University

Review of Industrial Organization, 2023, vol. 63, issue 1, No 4, 73-95

Abstract: Abstract Korea revived its small-scale industry (SSI) reservation policy in the early 2010s to protect small businesses and promote their competitiveness. However, whether this size-contingent entry regulation causes allocative inefficiency remains a subject of debate. This study examines the effects of SSI reservation on both the performance of small plants and allocative efficiency in the Korean ready-mixed concrete industry. By exploiting the exogenous variation in preexisting large plants across geographically independent markets, we find that the SSI policy increases the average productivity of small plants in the affected markets. However, the policy decreases competition, thereby causing allocative inefficiency in the reserved industries.

Keywords: Small-scale industry reservation; Ready-mixed concrete industry; Entry regulation; Allocative inefficiency (search for similar items in EconPapers)
JEL-codes: L11 L53 L61 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11151-023-09905-1

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