When Korea moved to an export-oriented industrialization strategy in the mid-1960s it did not dismantle the protection of the existing infant industries. Infant industries were vigorously promoted alongside the export drive, the main thrust coming in the mid-1970s under the name of “heavy and chemical industrialization” policy. In the early 1980s, Korean industrial policy ceased to favor explicitly certain industries but had to cope with the legacy of previous industrial policy. In summary, Korean infant industries were not allowed to live complacently behind the wall of protection but rather were driven to compete and improve performance. The process was not interrupted by foreign exchange crises. This should have also led to faster growth of output for infant industries. Protected infant industries failed to grow fast in most developing countries apparently for the same reasons they failed to mature a) What could have been the motivations of the Korean government for carrying out an infant-industry protection policy? (Answer this question with the arguments of your main course book, (Krugman; Obstfeld; Melitz; 2015)) Also,briefly explain what export-oriented industry and import-substitution industry are. b) What could be the reasons why the infant-industry protection policy does not work?
When Korea moved to an export-oriented industrialization strategy in the mid-1960s it did not dismantle the protection of the existing infant industries. Infant industries were vigorously promoted alongside the export drive, the main thrust coming in the mid-1970s under the name of “heavy and chemical industrialization” policy. In the early 1980s, Korean industrial policy ceased to favor explicitly certain industries but had to cope with the legacy of previous
industrial policy.
In summary, Korean infant industries were not allowed to live complacently behind the wall of protection but rather were driven to compete and improve performance. The process was not interrupted by foreign exchange crises. This should have also led to faster growth of output for infant industries. Protected infant industries failed to grow fast in most developing countries apparently for the same reasons they failed to mature
a) What could have been the motivations of the Korean government for carrying out an infant-industry protection policy? (Answer this question with the arguments of your main course book, (Krugman; Obstfeld; Melitz; 2015)) Also,briefly explain what export-oriented industry and import-substitution industry are.
b) What could be the reasons why the infant-industry protection policy does not work?
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