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A Cultural Analysis of South Korea's Economic Prospects

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  • O. Yul Kwon

Abstract

This study analyses cultural effects on economic development in South Korea. It introduces the concept of transaction costs as an operational intermediary between culture and economic development. Using this approach, it is found that culture affects economic development through its impacts on transaction costs in the static case. In the dynamic case, culture affects the economy through its impacts on the creative capacity of citizens. To assess the role of culture in future economic development, recent changes in Korean culture are examined. These include rising individualism and declining sense of community and trust; weaker appreciation of cooperation, compromise, and acceptance of dissent, and rising inclination towards confrontation; and the failing rule of law and rising perception of injustice. These all raise transaction costs. In addition, the future orientation is fading, as suggested by decreasing savings and investment rates, and by decline in the fertility rate. In view of these recent changes, Korean culture will have a negative effect on the future economy, compared to its positive influence in earlier decades from the 1960s. Culture is therefore not ceteris paribus. Even if all else remains the same, the prospects of the Korean economy will be tainted by the influence of culture.

Suggested Citation

  • O. Yul Kwon, 2005. "A Cultural Analysis of South Korea's Economic Prospects," Global Economic Review, Taylor & Francis Journals, vol. 34(2), pages 213-231.
    • Handle: RePEc:taf:glecrv:v:34:y:2005:i:2:p:213-231
    DOI: 10.1080/12265080500117541
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    References listed on IDEAS

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    1. Ho-Chul LEE & Mary P. MCNULTY, 2003. "Korea's Economic Crisis and Cultural Transition toward Individualism," ESRI Discussion paper series 071, Economic and Social Research Institute (ESRI).
    2. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
    3. Doh Shin & Conrad Rutkowski & Chong-Min Park, 2003. "The Quality of Life in Korea: Comparative and Dynamic Perspectives," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 62(1), pages 3-16, April.
    4. Steve Pejovich, 2003. "Understanding the transaction costs of transition: it's the culture, stupid," ICER Working Papers 24-2003, ICER - International Centre for Economic Research.
    5. Svetozar Pejovich, 2003. "Understanding the Transaction Costs of Transition: it's the Culture, Stupid," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 16(4), pages 347-361, December.
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    Cited by:

    1. Simon Feeny & Heather Mitchell & Christine Tran & Matthew Clarke, 2013. "The Determinants of Economic Growth Versus Genuine Progress in South Korea," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(3), pages 1055-1074, September.

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