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South Korea in the Fast LaneEconomic Development and Capital Formation$
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Young-Iob Chung

Print publication date: 2007

Print ISBN-13: 9780195325454

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780195325454.001.0001

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Economic Impacts of Industrial and Financial Policies

Economic Impacts of Industrial and Financial Policies

(p.175) 6 Economic Impacts of Industrial and Financial Policies
South Korea in the Fast Lane

Young‐Iob Chung (Contributor Webpage)

Oxford University Press

This chapter evaluates the economic impacts of the government's industrial and financial policies, which provided interest subsidies, wealth, and inflation windfalls to privileged businesses in terms of production costs, profits, investments, sectoral growth, industrial organization, and savings. The chapter further evaluates the impact of resource allocation on macroeconomic disruptions, sectoral misallocations between privileged and unsupported businesses, manufacturing vs. service industries, heavy and chemical industries vs. light industries, and large vs. small businesses. Economic rent-seeking activities, cronyism and corruption, non-performing loans, financial burdens, the disciplining of financial intermediaries, and financial and corporate reforms in recent years are assessed. The chapter also asks: were the government's industrial and financial policies the optimal measures to achieve the industrialization and the expansion of the nation's economy? Who were the major beneficiaries of the government's industrial and financial policies? Did government control of financial institutions deprive the banks of incentive to improve efficiency? Finally, the chapter lists the future economic and financial challenges facing the country.

Keywords:   beneficiaries, costs of production, profits, industrial policies, financial burdens, financial discipline, industrial organization, interest subsidy, resource allocation, wealth bounties

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