A Comparative Analysis of the US and Korea
KDI/EWC series on Economic Policy
Edited by John Karl Scholz, Hyungypo Moon and Sang-Hyup Lee
Chapter 11: Effects of government subsidies on investment by small companies
Bong Geul Chun and Hanwook Yoo examine the effects of government subsidies on investment by small companies. They begin with the venture support policies at home and abroad. The current venture support programs in Korea are divided into subsidies, loans and securities, and exhibitions and conventions. The authors list some examples of other country cases, although it is difficult to find counterparts abroad to Korean business startup subsidy projects that are used to provide cash incentives for new business. The authors then focus on the Venture Investment Subsidy Program (VISP) introduced by the Korean government in 2007, under the Small and Medium Businesses Administration, to promote business startups and employment creation. The program provides support for some investment costs for new manufacturing businesses in nonmetropolitan areas. Subsidies are paid as part of the National Balanced Development Committee’s measure for boosting local economies. Venture businesses have received subsidies only since 2007, and therefore the data accumulated thus far are limited. The authors examine, through empirical analysis, the effectiveness of this program in terms of promoting investment.
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