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Korea provides an illuminating case of state intervention to promote economic development. Like many other third world governments, Korea's government has selectively intervened to affect the allocation of resources among industrial activities. It has used taxes and subsidies, credit rationing, various kinds of licensing, and the creation of public enterprises, for example. But these policies have been applied in the context of a radically different development strategy, one of export-led industrialization. Moreover, Korea's economy has experienced exceptionally rapid development with relatively equitable distribution of the gains. This paper argues that the government's selective industrial policies have contributed importantly to Korea's rapid achievement of international competitiveness in a number of industries. Though accepted by many knowledgeable observers, the conclusion is controversial—inherently so owing to insufficient historical information and lack of agreement about the required counterfactual.

East Asian development experience provides the basis for understanding which are the essential elements of effective technology strategy and policy, those that are required for the efficacious development of countries that have not yet embarked on a path of sustained modernization. Globalization has had a profound impact on development, enabling countries that could exploit its propelling forces to pursue a potent strategy of export-led economic and technological development. The policies needed to sustain this strategy are those required to foster institutions that permit effective commerce among economic agents, those necessary to generate the rapid accumulation of human and physical capital, and those essential to ensure that resources are allocated in accord with the economy's dynamic comparative advantage. Of crucial importance among the latter are effectively implemented policies of selective intervention designed to develop infant industries and to foster their fast-paced achievement of international competitiveness through rapid attainment of the requisite technological capabilities.Export-led development, Externalities, Globalization, Industrial policy, Technology policy, Technology transfer JEL Classification: O14, O38,