DP13825 Chaebols and firm dynamics in Korea

Author(s): Philippe Aghion, Sergei Guriev, Kangchul Jo
Publication Date: June 2019
Date Revised: October 2019
Keyword(s): Asian crisis, chaebols, Schumpeterian Growth
JEL(s): L25, O43
Programme Areas: Public Economics, Financial Economics, Industrial Organization, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13825

We study firm dynamics in Korea before and after the 1997-98 Asian crisis and pro-competitive reforms that reduced the dominance of chaebols. We find that in industries that were dominated by chaebols before the crisis, labor productivity and TFP of non-chaebol firms increased markedly after the reforms (relative to other industries). Furthermore, entry of non-chaebol firms increased significantly in all industries after the reform. Finally, after the crisis, the non-chaebol firms also significantly increased their patenting activity (relative to non-chaebol firms). These results are in line with a neo-Schumpeterian view of transition from a growth model based on investment in existing technologies to an innovation-based model.