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Korea: Following Japan's Path

Korea: Following Japan's Path

(p.105) Chapter Five Korea: Following Japan's Path
The Power of Productivity
William W. Lewis
University of Chicago Press

This chapter presents an analysis of the Korean economy. Korea is following the Japanese development path. Koreans work very hard, save a lot of what they earn, and invest heavily in industries that have been favored by the government. These actions have yielded record-breaking economic growth. In 1970, Korea's GDP per capita was $2,500 in today's dollars. In 1995, it was $12,600, or five times higher. However, in both Korea and Japan, protection of domestic manufacturing industries and regulations constraining the development of services have resulted in low labor productivity and low return on capital invested. Moreover, if anything, Korea has not developed as efficiently as Japan. Korea has not developed any world-class industries, as Japan did in automobiles and electronics. Thus, without further reform, Korea, like Japan, will inevitably begin to stagnate as it approaches the economic frontier.

Keywords:   Korean economy, Japan, labor productivity, economic growth, domestic manufacturing

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