Catch-up and Crisis in Korea

Catch-up and Crisis in Korea

Wontack Hong

Whilst the process of catch-up in Korea – led by export-oriented growth – has been rapid and, in a sense, very successful, it has also been subject to turbulence, not least in a crisis of near bankruptcy that has dramatically revealed its Achilles heel. Informed by the 1997 crisis, Wontack Hong writes a new history of the Korean economy; one that seeks to understand export-oriented catch-up in newly industrialized countries (NICs) whilst offering a realistic appraisal and forewarning of the pitfalls which could signal self-destruction.

Chapter 4: Trade Pattern in the Early Phase of Catch-Up

Wontack Hong

Extract

4. Trade patterns in the early phase of catch-up 1. INTRODUCTION According to a survey of the economically active population, the total number of employed persons in Korea increased by 5 percent per annum on average during 1963–69, 4 percent per annum in the 1970s, 2.5 percent per annum in the 1980s, and 1.7 percent per annum in the 1990s. On the other hand, according to Pyo (2001), although total net physical capital stock in Korea increased by only about 5 percent per annum on average in the 1950s, it increased by as much as 13 percent per annum in the 1960s and 16 percent per annum in the 1970s. It kept increasing by 11 percent in the 1980s and about 10 percent per annum on average in the 1990s. Such rapid changes in the aggregate capital–labor ratio of an economy cannot but significantly change the factor intensities of its production and trade.1 This chapter examines the shifting pattern of trade in Korea during the early phase of its catch-up. Section 2 investigates the shifts in factor intensities of Korea’s export activities as well as those of competitive import replacement during the period 1960–85. It finds significantly increasing capital intensities of these activities over the period 1966–85. The results are consistent with what we may expect from the comparative static version of Heckscher–Ohlin theory of factor proportions (see Hong 1969, 1970, 1987a). In order to provide a global perspective, this chapter also examines...

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