Reform Unleashed Korean Growth

Before the reform in the 1960s, twin vicious circles perpetuated the shortages of foreign exchange and labor skill, and prevented the Korean economy from realizing its considerable growth potential. The breakthrough came when the Japanese labor shortage facilitated Korean exports, after economic normalization between the two countries. The reformed institutions reduced rent‐seeking and refocused Korean managerial efforts to pioneering activities. The Korean takeoff scenario is a shared theme among all four Asian newly industrialized economies cited by Lucas (1988) as showcases.