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Government-Led Restructuring of Firms' Excess Capacity and Its Limits: Korean “Big Deal” Case

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Authors
Lee, InKwon
Issue Date
2002
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 15 (No. 2 2002): 295-320
Keywords
Excess capacity; Strategic interaction; Industrial Policy
Abstract
Based on the statistical analysis of a panel data composed of 26 Korean Big Deal-related firms' financial information over the sample period of 1988-98, this paper rigorously examines which factors determine the scale of excess capacity. The statistical analysis in this study demonstrates that a firm's strategic decision to maximize profits subject to the constraints existing in its business environment may be a rational behavior at the firm level even if it may bring about excess capacity at the industry level ex-post. Statistical results imply that government-led resource allocation, such as the "Big Deals," has limits in its function and effectiveness because government can not ex ante control firm's strategic behaviors.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1268
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.15(2) (Summer 2002)
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