South Korea's Economic Dilemma

The Bank of Korea has highlighted a growing concern in the nation's economy: a significant increase in resource allocation inefficiency, particularly affecting innovative start-ups. This issue has reportedly worsened by up to three times since the 1990s.

Understanding the Scale

Utilizing total factor productivity (TFP) as a measure, the Bank's research reveals that inefficiency has expanded across all industries, with the service sector experiencing the most significant rise post the 2008 financial crisis and the 2020 COVID-19 pandemic.

Pathways to Improvement

The Bank emphasizes the need for an environment that facilitates smoother funding for high-productivity companies and start-ups, crucial for economic growth and innovation. Additionally, it suggests reevaluating protections and regulations that may hinder resource reallocation to more productive firms.