An Institutional Perspective
Chapter 2: Cultural Effects on the Korean Economy
2. Cultural effects on the Korean economy 2.1 INTRODUCTION As the new institutional economics argues, economic performance is shaped by both formal and informal (culture) institutions (North 1993). Culture has important bearings on the economy not only through its direct effects on the behaviours of individual economic actors but also through its effects on the performance of formal institutions. Whitley (1999) argues that culture underpins formal institutions and is the underlying prerequisite for the success of new arrangements of formal institutions. 1 Post-crisis reform of the Korean economy involved embedding new institutional arrangements with formal rules, which are consistent with advanced Western systems. Yet these arrangements need to be underpinned by values and understanding among members of Korean society that enable the arrangements to operate as policymakers have planned. Since the underlying cultural prerequisite for success of the new arrangements will take some time to develop within Korean society, the absence or still only nascent state of this required cultural underlay may explain the reform's limited success so far, as examined in Chapter 1.2 It is thus imperative to explore the role of culture to understand better the nature of economic development in Korea and how recent cultural changes augur for future prospects of the national economy. This chapter takes up that task. It recognizes that economic development is a complex phenomenon jointly determined by a variety of factors including labour, capital, technology, formal institutions and cultural values. Acknowledging the complementarities of these multiple factors, this chapter first investigates the...
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