How did Korea, one of the poorest countries in the world in the 1960s, become a model of success for developing economies just five decades later? This paper analyzes the role that chaebols, large Korean conglomerates, played in bringing about robust economic growth to the country since the conclusion of the Korean War. The broad research question was: What is the effect of chaebols’ dominance in the Korean economy on Korea’s growth rate? I argue that chaebols have had a positive impact on Korea’s growth rate by being the main drivers of Korea’s export-oriented industrialization, achieved through economies of scale. I also discuss two most prominent features of chaebols—diversification and vertical integration—and how they enabled chaebols to achieve overall efficiency in production. Using cross-sectional and time-series data, I perform regression analysis to examine the effect of chaebols’ dominance on Korea’s growth rate, compared with the average growth rate of the rest of the world and with Korea’s own long-term average growth rate. The results show that, holding constant exports, education, savings rate, population growth, regime type, and natural resources, the effect of chaebols’ dominance on Korea’s average growth rate was statistically significantly positive when compared with the average growth rate of the rest of the world, but statistically insignificant when compared with Korea’s own average growth rate. The findings of this study present a new perspective on the isolated effect of chaebol dominance on Korea’s economic growth, and lay a foundation for several avenues for future research.
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