Geopolitics and Export Miracles: Firm-Level Evidence from U.S. War Procurement in Korea

Nathaniel Lane, Philipp Barteska, Oliver Kim and Seung Joo Lee
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Nathaniel Lane: University of Oxford

No vxej4_v1, SocArXiv from Center for Open Science

Abstract: How did geopolitics shape East Asia’s economic development? We show that U.S. war procurement during the Vietnam War—a fiscal shock which peaked at 2.9 percent of South Korea's GDP, rivaling the Marshall Plan—catalyzed Korea’s export-led industrialization. We construct a new firm-level dataset linking Korean export records with U.S. procurement contracts (1966–1974) to estimate the causal impact of winning a contract on export performance. Winning an initial contract increases a firm’s likelihood of exporting by 46 percentage points and triples its export value. These effects extend beyond sales to the United States: treated firms also expanded into third-country markets. We validate our research design using unique, contemporaneous firm-level export targets, showing that contracts were not anticipated and unrelated to export shocks. The policy had lasting effects. We find that firms treated in the 1960s responded more strongly to South Korea’s heavy and chemical industry drive of the 1970s, indicating that U.S. procurement and domestic industrial policy were complementary. Our findings reveal a neglected channel through which Cold War geopolitics helped shape the East Asian economic miracle.

Date: 2025-11-11
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:vxej4_v1

DOI: 10.31219/osf.io/vxej4_v1

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