15 Export-Oriented Growth and Equity in Korea

Numerous literatures have documented that Korea’s rapid growth since the early 1960s is owed almost entirely to its export-oriented growth strategy. According to Samuelson’s static factor price equalization theorem, free trade with incomplete specialization can lead to the equalization of absolute factor returns among trading countries. In the early 196Os, Korea commenced its export-oriented growth by promoting exports of labor-intensive products on the basis of abundant cheap labor. By opening up and integrating its economy into the world market and trading directly with the most advanced countries in the world, the returns to the most abundant factor of production in Korea (i.e., the returns to labor) began to catch up with those of the advanced coun-tries. Indeed, the average wage rate in the Korean manufacturing sector amounted to mere one-twenty-third of that of the U.S. manufacturing sector in 1960 ($2.30 per hour) but grew to one-seventeenth of the latter ($3.35 per hour) in 1970 and to one-quarter of the latter ($14.31) by 1989. Even after making due allowance for autonomous capital accumulation and technica