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Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea

Nathan Lane ()
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Nathan Lane: University of Oxford

No 2021-10, SoDa Laboratories Working Paper Series from Monash University, SoDa Laboratories

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.

Keywords: industrial policy; East Asian miracle; economic history; industrial development; Heavy-Chemical Industry Drive (search for similar items in EconPapers)
JEL-codes: L5 N6 O14 O25 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-his, nep-ind, nep-isf and nep-sea
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