Econometrics & Applied Economics Seminar - Nathan Lane (Monash University)

Title: Manufacturing Revolutions: Industrial Policy and Networks in South Korea

Abstract: This paper uses a historic big push intervention and newly digitized data from South Korea to study the effects of industrial policy on (short- and long-run) industrial development. In 1973 South Korea transitioned to a military dictatorship and drastically changed its development strategy. I find industries targeted by the regime’s big push grew significantly more than non-targeted industries along several key dimensions of industrial development. These developmental effects persisted after industrial policies were retrenched, following the 1979 assassination of the president. Furthermore, I estimate the spillovers of the industrial policies using exogenous variation in the exposure to the policy across the input-output network. I find evidence of persistent pecuniary externalities like those posited by big push development theorists, such as Albert Hirschman. In other words, I find that South Korea’s controversial industrial policy was successful in producing industrial development, the benefits of which persisted through time and in industries not directly targeted by the policies.