This study aims to systematically review the theoretical and empirical discussions on the boundary and structure of markets, which is the fundamental element of industrial organization analysis, and to analyze Korea’s market structure in a comprehensive manner.
From 1977 to 1981, changes in Korea’s industrial structures and the corporate diversification trend led to a variety of alterations in the country’s economic landscape ranging from market structures to firm size distributions across the entire manufacturing sector. As of 1981, the top 100 firms of the total manufacturing sector show a very high level of overall concentration ratio, standing at 45.9% based on the amount of shipment. The high ratio results from factors such as economies of scale, increased numbers of multi-factory firms, and accelerating corporate diversification. Industrial concentration ratios of the top 3 firms of sub-category industries are higher in producer goods sector than in consumer goods sector, and they stand at 63.2% when calculated as a simple average of the entire manufacturing sector, showing a high level of concentration. When compared to 1977, however, the 1981 industrial structure shows a higher proportion of competitive or oligopolistic low-concentration markets as the number of sectors with concentration ratios less than 40% increased from 59 to 75, and the number of sectors with concentration ratios bigger than 40% reduced from 272 to 256. Analysis of market structures on the commodity level shows that monopolistic or duopolistic markets sharply shrank both in their absolute number and shipment shares, while oligopolistic markets significantly expanded in both terms.
As product diversification rapidly advances with the relative increase of multi-factory and multi-product firms, the traditional market analysis methodology assuming one-factory/one-product firm lost its analytic usefulness. Market expansion through diversification is a major driver of the rapid growth of large corporations, which can thwart small and medium-sized enterprises. It is necessary to bring the potential market power abuses of large multi-product/multi-factory firms under control, while keeping from eliminating the incentives of corporate growth through diversification. The current market structures of Korea’s manufacturing sector can generally be characterized as highly concentrated. But as large scale industries show decreasing concentration ratios, effective implementation of competition policies can significantly improve the market structures.
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|Series Title; No||연구보고 / 84-06|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||KDI; KDI School|