Fact of the Week: Increased Firm Concentration in South Korea’s Manufacturing Sector Contributed to a 12-fold Increase in GDP From 1972 to 2011

Source: Jaedo Choi, et al., “Superstars or Supervillains? Large Firms in the South Korean Growth Miracle,” working paper, National Bureau of Economic Research, July 2024.

Commentary: In a working paper published by the National Bureau of Economic Research, Jaedo Choi, et al., investigated the effect of “superstar” firms in South Korea during the so-called “miracle growth period” from 1972 to 2011, when South Korea experienced rapid, unprecedented economic growth. During this time, GDP in South Korea grew at an average annual rate of 6.5 percent, amounting to a 12-fold increase. At the same time, manufacturing power in South Korea became increasingly concentrated in the largest three companies. These top three firms experienced greater total factor productivity and larger increases in foreign demand than smaller competing firms while imposing fewer markups. Despite popular rhetoric, Choi and his colleagues found that the concentration of market power in the top three firms benefited the South Korean economy and positively impacted GDP during the miracle growth period.