IDEAS home Printed from https://ideas.repec.org/p/ags/widerw/295361.html

The Change of the Financial System and Developmental State in Korea

Author

Listed:
  • Lee, Kang-kook

Abstract

This study examines the role of institutions and their change related to the rapid economic development and the 1997 Korean financial crisis. In Korea, the government built a state-led financial system through the 1960s and 1970s and a specific government-bank-business relationship based on it. It promoted economic growth by allocating financial resources controlled by it to targeted industries or firms, with discipline over business achieved through these institutions. However, as the economy developed, this financial system and the relationship between the government and business changed. While the government's control of finance weakened, the economic power of chaebols grew stronger, and their relationship changed from dominance and discipline with co-operation to regulation and conflicts. Accordingly, former institutions could not work well, but there was no proper reformulation of them and they failed to evolve to match these changes. The banks failed to monitor business and the problems in banks and chaebols, including the bad corporate governance, grew serious. Subsequently, the rapid and incautious financial liberalization with these problems led the Korean economy into economic crisis in 1997. Institutional reforms and new institution building are urgently required, but must be adopted under adverse circumstances.

Suggested Citation

  • Lee, Kang-kook, "undated". "The Change of the Financial System and Developmental State in Korea," WIDER Working Papers 295361, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:ags:widerw:295361
    DOI: 10.22004/ag.econ.295361
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/295361/files/RIP19.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.295361?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lee, Jong-Wha, 1996. "Government Interventions and Productivity Growth," Journal of Economic Growth, Springer, vol. 1(3), pages 391-414, September.
    2. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 641-680.
    3. Akyuz, Yilmaz & Gore, Charles, 1996. "The investment-profits nexus in East Asian industrialization," World Development, Elsevier, vol. 24(3), pages 461-470, March.
    4. Samuels, Warren J, 1995. "The Present State of Institutional Economics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 19(4), pages 569-590, August.
    5. Amsden, Alice H. & Euh, Yoon-Dae, 1993. "South Korea's 1980s financial reforms: Good-bye financial repression (maybe), hello new institutional restraints," World Development, Elsevier, vol. 21(3), pages 379-390, March.
    6. Stiglitz, Joseph E & Uy, Marilou, 1996. "Financial Markets, Public Policy, and the East Asian Miracle," The World Bank Research Observer, World Bank, vol. 11(2), pages 249-276, August.
    7. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
    8. Stiglitz, Joseph E, 1989. "Markets, Market Failures, and Development," American Economic Review, American Economic Association, vol. 79(2), pages 197-203, May.
    9. Dalla, I. & Khatkhate, D., 1995. "Regulated Deregulation of the Financial System in Korea," World Bank - Discussion Papers 292, World Bank.
    10. Grabowski, Richard, 1988. "The theory of induced institutional innovation: a critique," World Development, Elsevier, vol. 16(3), pages 385-394, March.
    11. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kang-Kook Lee, 2010. "The Change of the Financial System and Developmental State in Korea," Working Papers id:3307, eSocialSciences.
    2. Ashok Chakravarti, 2012. "Institutions, Economic Performance and the Visible Hand," Books, Edward Elgar Publishing, number 14751.
    3. Chia-Hung Sun, 2005. "Productivity growth in East Asian manufacturing: a fading miracle or measurement problem?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(1), pages 1-19.
    4. Lopez, Ramon, 2003. "The Policy Roots of Socioeconomic Stagnation and Environmental Implosion: Latin America 1950-2000," World Development, Elsevier, vol. 31(2), pages 259-280, February.
    5. Kumar, R. & Debroy, B., 1999. "The Asian Crisis: an Alternative View," Papers 59, Asian Development Bank.
    6. Lee, Jong-Wha, 2005. "Human capital and productivity for Korea's sustained economic growth," Journal of Asian Economics, Elsevier, vol. 16(4), pages 663-687, August.
    7. Crafts, Nicholas, 1999. "Quantitative economic history," Economic History Working Papers 22390, London School of Economics and Political Science, Department of Economic History.
    8. Gary Dymski & James Crotty, 2000. "Can the Global Neoliberal Regime Survive Victory in Asia? The Political Economy of the Asian Crisis," Published Studies ps5, Political Economy Research Institute, University of Massachusetts at Amherst.
    9. Prados de la Escosura, Leandro & Rosés, Joan R., 2008. "Proximate causes of economic growth in Spain, 1850-2000," IFCS - Working Papers in Economic History.WH wp08-12, Universidad Carlos III de Madrid. Instituto Figuerola.
    10. Ludger Wößmann, 2005. "Educational Production in East Asia: The Impact of Family Background and Schooling Policies on Student Performance," German Economic Review, Verein für Socialpolitik, vol. 6(3), pages 331-353, August.
    11. Huikang Ying, 2014. "Growth and Structural Change in a Dynamic Lagakos-Waugh Model," Bristol Economics Discussion Papers 14/639, School of Economics, University of Bristol, UK.
    12. Robert W. Arnold, 2003. "Modeling Long-Run Economic Growth: Technical Paper 2003-04," Working Papers 14497, Congressional Budget Office.
    13. Boussemart, Jean-Philippe & Leleu, Hervé & Mensah, Edward & Shitikova, Karina, 2020. "Technological catching-up and structural convergence among US industries," Economic Modelling, Elsevier, vol. 84(C), pages 135-146.
    14. Sarath Delpachitra & Pham Van Dai, 2012. "The Determinants of TFP Growth in Middle Income Economies in ASEAN: Implication of Financial Crises," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 11(1), pages 63-88, June.
    15. Timmer, Marcel P., 2002. "Climbing the Technology Ladder Too Fast? New Evidence on Comparative Productivity Performance in Asian Manufacturing," Journal of the Japanese and International Economies, Elsevier, vol. 16(1), pages 50-72, March.
    16. Mr. Brou E Aka & Mr. Bernardin Akitoby & Mr. Amor Tahari & Mr. Dhaneshwar Ghura, 2004. "Sources of Growth in Sub-Saharan Africa," IMF Working Papers 2004/176, International Monetary Fund.
    17. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Do institutions matter for growth? Evidence from East Asian countries," MPRA Paper 42158, University Library of Munich, Germany.
    18. Timmer, Marcel P., 1999. "Climbing the Technology Ladder Too Fast? An International Comparison of Productivity in South and East- Asian Manufacturing, 1963-1993," Working Papers 99.2, Eindhoven Center for Innovation Studies.
    19. Jerzmanowski, Michal, 2007. "Total factor productivity differences: Appropriate technology vs. efficiency," European Economic Review, Elsevier, vol. 51(8), pages 2080-2110, November.
    20. Patricia Guiguet & Jean-Christophe Simon, 1999. "La gestion de l'emploi, obstacle à un nouveau régime de croissance en Asie du Sud-Est," Revue Tiers Monde, Programme National Persée, vol. 40(158), pages 355-376.

    More about this item

    Keywords

    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:widerw:295361. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/widerfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.