Skip Nav Destination
Close Modal
Update search
NARROW
Format
Journal
Date
Availability
1-1 of 1
Wonhyuk Lim
Close
Follow your search
Access your saved searches in your account
Would you like to receive an alert when new items match your search?
Sort by
Journal Articles
Publisher: Journals Gateway
Asian Economic Papers (2006) 5 (3): 1–18.
Published: 01 June 2006
Abstract
View article
PDF
In post-crisis Korea, facility (equipment) investment shows the worrisome trends of a slowdown in investment growth and a decline in investment propensity. We marshal micro and macro data to examine four major explanations for these important developments. Our analysis: (a) finds that cyclical factors such as depressed private consumption in 2003 and 2004 did lead to lower investments in automobiles, hence dragging down total investment growth in these years; (b) rejects the claim that investment was lowered by an “anti- chaebol environment” created by the Roh Moo-hyun government (facility investment by large firms actually increased by a great deal in 2003 and 2004, whereas aggregate investment in the national account showed anemic growth); (c) supports the “moral hazard” hypothesis, which states that chaebol investment in the pre-crisis period was abnormally high because of implicit state guarantees (the chaebol dummy in our investment equations was no longer statistically significant in the post-crisis period, in the aftermath of large-scale bankruptcies); and (d) supports the “hollowing-out” hypothesis, which holds that outward foreign direct investment has reduced domestic facility investment because the price competitiveness of final assembly and other labor-intensive sectors in Korea has been eroded by the rise of late-developing countries such as China and Vietnam.