Does Balanced Regional Development Policy Work for Korea? - Empirical Evidence on Regional Disparity-

Abstract

While achieving remarkably rapid economic growth, Korea adopted an unbalanced growth strategy for industrialization. However, in a recent decade, balanced regional development policy emerged as a top priority of the government in response to social problems caused by the growth-pole strategy. The policy has been one of the main policy objectives in the two most recent administrations, and planned with rosy expectations of substantial contributions to interregional balance and the achievement of social cohesion with allocated significant portions of the budget. Though well known and controversial, its effectiveness on reduction in regional disparities has received little to no long-term empirical investigation to date. In this context, this study begins to fill this vacuum with one major research question: Did the balanced regional development strategy work for Korea? To address the question, first of all, this paper sheds light on theoretical and historical background of BRDPs in Korea. It in turns conducts empirical analysis through GRDP (Gross Regional Domestic Product) as a nominal indicator and TFP (Total Factor Productivity) as a real indicator for 14 metropolitan regions. The analysis covers 1995 to 2010 and examines inequality among the regions by applying Gini and Theil indices to evaluate whether the balanced development strategy reduced the interregional inequality in Korea. The findings suggest the regional TFP and GRDP disparities widened despite the continuous policy intervention to lessen the gap during the period. In particular, the upward trend of the inequality coefficient implies that the policies faced obstacles to achieving balanced regional development. This paper also offers some policy implications regarding balanced regional development as an attainable goal in Korea.