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The Performance of Industrial Policy: Evidence from Korea

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  • Jaymin Lee

Abstract

This paper first shows that Korea implemented industrial policy properly, promoting infant industries rather than mature ones. The paper then shows that infant industries promoted by industrial policy have matured over time, as well as grown faster than mature industries not promoted by industrial policy. However, this happened as industrial policy was being lifted, rather than as it was being implemented. The paper also shows that, although industrial policy may pay off more easily than previously thought, Korean industrial policy fails to pay off because it distorted the price mechanism too severely and for too long. The analysis of the paper suggests that industrial policy in latecomer countries, when implemented to address market failure, should be much more moderate than what Korea implemented.

Suggested Citation

  • Jaymin Lee, 2011. "The Performance of Industrial Policy: Evidence from Korea," International Economic Journal, Taylor & Francis Journals, vol. 25(1), pages 1-27.
    • Handle: RePEc:taf:intecj:v:25:y:2011:i:1:p:1-27
    DOI: 10.1080/10168737.2011.550122
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    References listed on IDEAS

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    1. Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
    2. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4039-4214, Elsevier.
    3. Il SaKong, 1993. "Korea in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 29, January.
    4. Dani Rodrik, 2008. "Normalizing Industrial Policy," World Bank Publications - Books, The World Bank Group, number 28009, April.
    5. Marcus Noland & Howard Pack, 2003. "Industrial Policy in an Era of Globalization: Lessons from Asia," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 358, July.
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    Cited by:

    1. Kristine Farla, 2015. "Industrial Policy for Growth," Journal of Industry, Competition and Trade, Springer, vol. 15(3), pages 257-282, September.

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