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<p>We assess the impact of industrial policy in Korea, specifically, the Heavy and Chemical Industrialization (HCI) Drive (1973–1979). Using the HCI Drive as the treatment, we employ the synthetic control method and data for a large sample of countries for the period 1960–2018. We construct a synthetic Korea using data from countries sharing similar characteristics to Korea during the pre-treatment period (1960–1972). We then compare the per capita GDP levels of actual and synthetic Korea during the post-treatment period. The results indicate that the HCI Drive has more than quadrupled Korea’s per capita GDP compared to the counterfactual by the end of the 1980s, and still 2.4 times the counterfactual in 2018. Placebo tests show that our results are robust. Based on the large positive treatment effect of the HCI Drive, we argue that the government’s industrial policy was highly effective in raising the living standards of Korea in the long run.</p>

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Does Industrial Policy Drive Economic Development? A Synthetic Control Assessment of South Korea

  • 期刊论文

  • 发表日期：

    2026年6月3日

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  • K. Ali Akkemik,
  • Murat Yulek,
  • Taseer Salahuddin

摘要

We assess the impact of industrial policy in Korea, specifically, the Heavy and Chemical Industrialization (HCI) Drive (1973–1979). Using the HCI Drive as the treatment, we employ the synthetic control method and data for a large sample of countries for the period 1960–2018. We construct a synthetic Korea using data from countries sharing similar characteristics to Korea during the pre-treatment period (1960–1972). We then compare the per capita GDP levels of actual and synthetic Korea during the post-treatment period. The results indicate that the HCI Drive has more than quadrupled Korea’s per capita GDP compared to the counterfactual by the end of the 1980s, and still 2.4 times the counterfactual in 2018. Placebo tests show that our results are robust. Based on the large positive treatment effect of the HCI Drive, we argue that the government’s industrial policy was highly effective in raising the living standards of Korea in the long run.