Industrialization and the Big Push: Theory and Evidence from South Korea

Jaedo Choi and Younghun Shim

No 2024/259, IMF Working Papers from International Monetary Fund

Abstract: We study how one-time subsidies for adoption of modern technology drove Korea's industrialization in the 1970s. Leveraging unique historical data, we provide causal evidence consistent with coordination failures: adoption improved adopters' performance and generated local spillovers, with firms more likely to adopt when other local firms had already adopted. We incorporate these findings into a quantitative model, where the potential for multiple steady states depends on parameters mapped to the causal estimates. In our calibrated model, Korea's one-time subsidies shifted its economy to a more industrialized steady state, increasing heavy manufacturing's GDP share by 8.6% and export intensity by 16.2%. Larger market access amplifies the effects of these subsidies, as the gains from adoption increase with firms' scale.

Keywords: Big push; Industrialization; Coordination failure; Complementarity; Local spillover; Market access; Younghun shim; IMF working paper No. 2024/259; Korea's industrialization; adoption increase; adopter share; Exports; Spillovers; Manufacturing; Global (search for similar items in EconPapers)
Pages: 93
Date: 2024-12-20
New Economics Papers: this item is included in nep-his, nep-ino, nep-tid and nep-ure
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