A recent working paper by Jaedo Choi and Andrei A. Levchenko claims that industrial policy in South Korea has had sizeable long‐term benefits:
This paper provides causal evidence of the impact of industrial policy on firms’ long‐term performance and quantifies industrial policy’s long‐term welfare effects. Using a natural experiment and unique historical data during the Heavy and Chemical Industry (HCI) Drive in South Korea, we find large and persistent effects of firm‐level subsidies on firm size. Subsidized firms are larger than those never subsidized even 30 years after subsidies ended. … Counterfactual analysis implies that the industrial policy generated larger benefits than costs. If the industrial policy had not been implemented, South Korea’s welfare would have been 22–31% lower, depending on how long‐lived are the productivity benefits of LBD.
