Korea’s economic growth and the growth model in the changing global economy

Abstract

This paper examines Korea’s economic growth in the 2000s, with a focus on the growth model. Korea sustained relatively high growth for two decades after the 1997 crisis, primarily due to the rapid increase in exports to China. However, inequality rose and the wage share fell during the early part of this period, leading to the criticism in the mid- 2010s. The former Moon government introduced an “income-led growth” strategy aimed at increasing wages and household income to stimulate economic growth. Although it reduced income inequality, its effectiveness in promoting economic growth was limited because of the changes in the global economy and constraints in fiscal stimulus. Considering the shift in the global economic order associated with geopolitical tensions, Korea should transit to a growth model led domestic demand, with an enhanced role of the state, for stable economic growth.