Geopolitics and export miracles: firm-level evidence from US war procurement in Korea

Philipp Barteska, Oliver Kim, Nathan Lane and Seung Joo Lee

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: How did geopolitics shape East Asia's economic development? We find that US military procurement during the Vietnam War - a shock which peaked at nearly 3% of South Korean GDP, rivaling the Marshall Plan - catalyzed Korea's export-led industrialization. We construct a new firm-level dataset that matches Korean export records with US procurement contracts awarded between 1965 and 1974 to estimate the causal impact of winning a contract on export performance. A firm winning its first contract raises its likelihood of exporting by 14.7 percentage points and its export value by 40%. Treated firms are more likely to expand into third-country markets and export manufacturing products - and these gains are unlikely to come from business stealing. Finally, we find that US procurement and domestic industrial policy were likely complementary. Our findings reveal a neglected channel through which Cold War geopolitics shaped the East Asian economic miracle.

Date: 2026-08-20
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