After decades of rapid growth led by large, industrialized chaebol firms, Korea has reached the technology frontier in many of its largest industries and run out of room for future robust growth through this model alone. Instead of focusing just on increasing technology development in export sectors, writes Rob Atkinson for the Korea Economic Institute of America, Korea should seek to grow by increasing productivity and innovation across its entire economy. Korea has become a “dual economy” where rapid gains by large, efficient global companies are mirrored by relative stagnation in unproductive small businesses and services. To overcome this dualism, Korea needs to take serious steps to improve productivity in markers dominated by small business and service firms. Overcoming this will require a fundamental shift in Korean economic policy away from subsidizing and protecting SMEs as well toward greater efforts to spur information and communications technology adoption by all enterprises. Absent these fundamental reforms, the likelihood that Korean per-capita GDP will continue to rapidly converge with U.S. per-capita GDP is small.
