Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea
This study investigates the causal impact of South Korea’s Heavy and Chemical Industry (HCI) policy (1973–1979) on manufacturing upgrading. Exploiting the exogenous policy discontinuity as a quasi-natural experiment, the authors construct a novel industry-level panel dataset on policy exposure and performance by integrating input-output network analysis to quantify both direct and indirect intersectoral spillovers. Results show that the HCI policy significantly expanded the scale and export capacity of targeted industries and catalyzed downstream upgrading through supply-chain linkages; these effects persisted post-policy termination, facilitating a structural shift toward high-value-added manufacturing. The key contribution lies in pioneering the integration of regression discontinuity design with input-output–based industrial linkage analysis—demonstrating that short-term industrial policies can generate enduring dynamic comparative advantages and coordinated upgrading pathways across interconnected sectors.