This study analyzes the long-term changes in Korea’s market structure since the 1980s, as well as the characteristics of and reasons behind the changes around the 1997 economic crisis, to derive policy implications.
Korea’s market structure has steadily improved over the last 20 years with the expansion of market and economic growth. The 1997 economic crisis, however, shocked the market structure, and market concentration which had gradually decreased began to increase after the crisis. Although market concentration is again on the decline with the dust of the crisis having largely settled, Korea’s market structure is exhibiting quite a different pattern than the past.
The manufacturing sector still occupies a big chunk of the Korean economy, but its growth sharply slowed with the proportion of large enterprises decreasing and that of smaller companies increasing. The heavy chemical, export, and capital goods industry had indicated faster growth than the light chemical, domestic, and consumption goods industry, respectively, in Korea. These patterns became clearer around the crisis. The aggregate concentration in the manufacturing sector had been on a steady decline until it began to rise in 1995, eventually spiking with the crisis. In the aftermath of the crisis in 1999, the proportion of the top 100 players in the manufacturing sector remained at 45.1%. This may be due to Korea’s recent high reliance on a few key sectors such as semi-conductor, electronics and automobile.
Korea’s industrial concentration had been on a steady decline since the 1980s until it spiked in 1997, before resuming its previous level in 1999. The steady decrease in industrial concentration means Korea’s industrial structure was becoming increasingly competitive. Despite the recent decrease in overall manufacturing concentration, however, the few key industries are showing an increasingly concentrated structure.
The market structure changes that emerged around the crisis were greatly affected by the industrial structure changes. The heavy chemical, export, and capital goods industry that achieved high growth in this period were mostly dominated by large enterprises, which further exacerbated the gap between large and small firms, eventually raising the degree of concentration. A quantitative analysis found that, around the crisis, the industries with faster growth, more exports, and more capital intensity tended to have higher levels of concentration.
Market structure is one of the strongest indicators of a market’s competitiveness. However, it is hard to predict at this stage in what direction Korea’s market structure will move. The heavy chemical, export, and capital goods industries that had driven the growth of the country’s manufacturing sector in recent years will maintain their potency for the foreseeable future. Small and medium enterprises, which had witnessed continued growth since the 1990s, however, slowed after the crisis. Manufacturing firms also lost their momentum since the 90s. Korea’s future market structure will be determined by factors such as the relative growth difference between large and small enterprises, and the change in the number of firms.
경제위기와 시장구조 변화(Economic crises and market structure changes)
|Series Title; No||정책연구시리즈|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||한국개발연구원; KDI 국제정책대학원|