The Growth and Development of South Korean Economy

The Growth and Development of South Korean Economy

Document details
Category: Economics Essay
Subcategory: International Economics
Words: 824
Pages: 3

THE GROWTH AND DEVELOPMENT OF SOUTH KOREA In the past 20 - 30 years, South Korea has experienced economic development unlike the vast majority of other developing countries. Not only did South Koreas percentage in GNP per capita, gross domestic savings, and investment increased, but as well in international trade and in the labor force venturing out of the agricultural sector. Of the three following economic growth and development theories neoclassical, structural change, and dependency, only one, the dependency theory, contradicts with the successful growth of South Korea. The other two greatly support it. The neoclassical growth theory which supports Koreas growth and development states that savings increases the standard of living, and that investment leads to growth. As shown in the data chart, savings increased by 11 percent while investment increased by 13. This means that income increased. With a higher income, people are able to spend and save more which in turn causes more money to circulate in the market which ultimately increases total social welfare. This is similar to most supply and demand situations in that if demand increases, suppliers will increase the supply to meet the demand. The theory also states that diminishing returns to labor and capital brings about an incentive to advance technology. According to this theory, LCDs should grow faster than MDCs. The reasoning behind this is that LCDs begin with less capital, therefore their returns from each investment is higher. For example, an additional investment, i.e. a worker, in a MDC will yield an even lower return than the previous investment. However, because there is not a lot of capital in a LCD, an additional investment will yield a great return. Eventually, it will come to a point where marginal cost exceeds marginal benefit. This is where an advancement in technology plays role. Even though this is not mentioned in the data, it is needed to keep the economic growth from slowing down or perhaps...

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