The transformation of the Korean economy

During the 1960s and 1970s the poor, agrarian Korean economy transformed into a dynamic, newly industrializing economy. The economy grew rapidly, at around 10 percent per annum on average; the manufacturing sector's contribution to GNP rose from 14 to 27 percent, while the primary sector's contribution was halved from 45 to 22 percent. This chapter investigates the reason behind the transformation by utilizing the input-output tables. It finds that exports were the most powerful driving force behind the growth and transformation of the economy. Among the components of the final demands, exports grew most rapidly at nearly 30 percent per annum on average; the growth of gross capital fixed formation was the next fastest at nearly 20 percent per annum on average. As a result, Korea rapidly became a capital-abundant country; during the 1966-1979 period the non-residential capital stock per capita in Korea rose from the level observed in the UK in 1820 to that observed in 1950. This chapter also discusses the government policies related to capital accumulation and their ramifications.