Taxes, Outward Orientation, and Growth Performance in Korea

Irene Trela, John Whalley

NBER Working Paper No. 3377
Issued in June 1990
NBER Program(s):Public Economics, International Trade and Investment, International Finance and Macroeconomics

This paper both discusses and evaluates the role of tax policy in the Korean growth process from the early 1960s to the late 1980s. It begins by reviewing the evolution of Korean policy over this developmental sequence, emphasizing three distinct regime switches, and the tax policies which were part of them. It then presents an analytical framework for quantitative assessment of the contribution of tax policies to this growth through induced intersectoral resource transfers and impacts on effort and labour supply in agriculture and manufacturing sectors. What emerges from the model calculations is that tax policy has played a relatively modest role in Korean growth and that one should look outside of tax policy for the main factors underlying strong Korean growth.

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Document Object Identifier (DOI): 10.3386/w3377


  • "Taxes, Outward Orientation, and Growth Performance ...Korea", in J. Khalilzadeh-Shirazi and A. Shah, eds., Tax Policy in Developing Countries, The World Bank 1991/ and in Fiscal Incentives for Investment in DCs, Oxford University Press/Johns Hopkins for the World Bank, forthcoming
  • Takatoshi Ito and Anne O. Krueger, eds. "The Role of Tax Policy in Korea's Economic Growth," in The Political Economy of Tax Reform. Chicago: The University of Chicago Press, 1992.
  • The Role of Tax Policy in Korea's Economic Growth, Irene Trela, John Whalley. in The Political Economy of Tax Reform, NBER-EASE Volume 1, Ito and Krueger. 1992

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