Is economic concentration the Achilles' heel of the Korean economy?  Many people believe that the Korean economic concentration remains at abnormally high level and has been caused by the 30 largest chaebols (business groups). Economists often share this belief and perceive that economic concentration is a Korea-specific phenomenon just as chaebol is a Korea-specific organization. Given this perception, it is no wonder why there exists few literature on in-depth empirical study or comparative study of economic organization and concentration.  Instead, previous literature in this line of study used to follow the neoclassical tradition to look for a market failure view or a monopoly explanation. The government policy is also based on these general beliefs.  Under the Fair Trade Act the government aims explicitly at restraining economic concentration of the 30 largest chaebols.

This paper reexamines two questions concerning the issues of the Korean economic concentration.  one is whether economic concentration and monopoly power increase during the period of 1985∼95.  The other question is whether economic concentration is a Korea-specific phenomenon.  I examine the first question by measuring various concentration indices and mobility statistics, while examining the second one by international comparative study including U.S.A., Japan, Germany, U.K., France, Sweden, Switzerland. For international comparison the Fortune magazine is used to draw the firm data, and the OECD STAN Database is used to draw the industry data.

This study shows that there is huge discrepancy between the general beliefs and the facts on the issues of economic concentration. First, it is not necessarily true that economic concentration in Korea has increased continuously during the sample period. The outcome depends on which variable among value added, sales, assets, and employment is used to measure concentration. The value added and asset indices show the increase, while the other indices show the decrease. In addition, mobility statistics such as market instability index and rank correlation coefficient show that the monopoly power of the 30 chaebols has not increased.

Secondly, economic concentration is never a Korea-specific phenomenon.  on the contrary, The Korean economic concentration remains much low as compared with the seven advanced countries. For example, when the Korean 30 chaebols are directly compared to the other countries' 30 largest firms, the employment-based concentration index is the lowest in Korea; i.e. Korea 18.5%,  U.S.A. 22.9%, Germany 31.7%, and U.K. 32.6%. Comparing the 100 largest firms among Korea, U.S.A. and Japan leads to the same conclusion. Moreover, the analysis of mobility statistics shows that in Korea the  entry-exit ratio and the market instability index are the highest among the three countries, while rank correlation coefficient is second low. These mobility indices imply that the monopoly power of the Korean economy is relatively low.  

The above two findings are quite the opposite to the generally held view on the Korean economic concentration.  one may infer from these facts that the government should reconsider its regulation on economic concentration.  Since economic concentration is not a Korea-specific phenomenon, the Korea-specific regulation may not be justified.