by Marcus Noland, Peterson Institute for International Economics
South Korea is arguably the premier development success story of the last half-century. Despite this success, there has been a nagging sense among many observers that the development of Korea's economic and political institutions has not kept pace with the breakneck tempo of economic growth. During the decade since the 1997–98 financial crisis, center-left governments have placed considerable emphasis on institutional reform. This paper examines 52 institutional indicators covering 44 countries to analyze Korea's relative institutional performance over the past decade.
The authors conclude that improvements in Korea's political and economic institutions over the past decade have outstripped the country's "First World economy, Third World politics" image. While Korea generally underperforms modestly relative to its level of per capita income, it is not an outlier, and on most indicators it is converging on global norms. However, it would be difficult to argue on the basis of this analysis that institutional development led economic growth. Institutions do not appear to rule, at least in Korea.
The patterns on specific indicators suggest that global institutions play some role as an external policy anchor: The existence of international norms gives policymakers a goal, and the existence of international institutions (and other avenues of international diplomatic pressure) helps in overcoming the historical weakness and parochialism of Korean public institutions.
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