Industrial Policy In An Export-Propelled Economy: Lessons From South Korea\u27s Experience

Korea provides an illuminating case of state intervention to promote economic development. Like many other third world governments, Korea\u27s government has selectively intervened to affect the allocation of resources among industrial activities. It has used taxes and subsidies, credit rationing, various kinds of licensing, and the creation of public enterprises, for example. But these policies have been applied in the context of a radically different development strategy, one of export-led industrialization. Moreover, Korea\u27s economy has experienced exceptionally rapid development with relatively equitable distribution of the gains. This paper argues that the government\u27s selective industrial policies have contributed importantly to Korea\u27s rapid achievement of international competitiveness in a number of industries. Though accepted by many knowledgeable observers, the conclusion is controversial—inherently so owing to insufficient historical information and lack of agreement about the required counterfactual