Author: Mi-Kyung Pai
1 Introduction
The role of government in the “Big-Push Heavy Machinery and Chemical Industries (HCI) policy” from 1973 up to late 1979 in Korea was excessively directive, with the goal of fostering HCI1) for export promotion. A broad range of incentive schemes2) including fiscal, monetary and trade policies were implemented to urge the big business groups in Korea to join the HCI Projects3),
all of which resulted in a size distribution substantially skewed toward large firms. Then came growing concerns on the issue of the size distribution of manufacturing firms.4) The gaps in the distribution of size between the Large Establishments (LEs) and the Small and Medium-sized Establishments (SMEs) of Korea had grown conspicuous by the mid-1970s, in contrast to other East Asia countries such as Hong Kong, Taiwan, and Japan5), where income inequality and the percentage share of the LEs are proved to be inversely related via empirical analysis.6) The above literature indicates clearly that the size distribution of manufacturing firms has recently become a prominent issue
around the world in relation to technical efficiency. Also in Korea, the technical efficiency of different size-classes of firms has been a contentious issue for a long time.