Examining Party Lines and Economic Growth in South Korea: Past Experience and Future Implications

This study tries to examine data on the economies of the respective administrations and find an objective basis for the link between party lines and economic growth - an association that had become rather firmly entrenched in the minds of numerous South Korean voters in the latest election. By using a number of sensible measures of economic growth, viewed from different angles, we provide evidence in support of the voter sentiment of 2007. In doing so, we also identify the two key variables behind the link between party lines and past growth: capital investment and total factor productivity. Crucial factors in achieving sound economic growth were an administration's ability to muster vibrant investment and its competence in improving the allocation of resources, including capital investment, through higher structural and regulatory efficiency. The identification of these two variables carries a very important lesson for the current Lee Myung-bak administration, which has concentrated on boosting corporate investment in physical capital from the start. In other words, too much focus on capital investment runs the risk of missing out on another primary source of economic growth we have identified: total factor productivity.