Search Results

This chapter investigates the magnitude, features, and attributes of investment in various segments of the economy based on (i) ownership (e.g., public or private sectors); (ii) the nature of industries (e.g., industry, agriculture, trade, and service); (iii) the type of industry (e.g., social overhead capital and manufacturing); (iv) the capital-, technology-, and labor-intensities of industry; (v) the scale of investment; and (vi) the goals of investment by various economic entities, e.g., organizations and nationals. The analysis of investments in social overhead capital is further broken down according to transportation, communications, and electric power industries, while manufacturing is examined based on the types of goods produced, namely, light and heavy, and chemical industries. These not only reflected the transformation of Korean economy, but also showed the goals of investment. The volume, investors, and the nature of investment underscored the contributions made by different economic entities, such as the government, and different nationalities, namely, the Japanese, non-Japanese “foreigners”, and Koreans, in forging the country's capital formation, which reveal the underlying forces for the structural changes in the economy over time.

This chapter investigates aggregate and sectoral investments in both the public and private sectors, estimating their magnitudes, discerning their patterns and nature, and assessing the role of the government. The nature of aggregate investment is evaluated in terms of the extent and type of investment in construction, equipment, machinery, and replacement/new capital goods, while sectoral investment is examined relative to social overhead capital in the public, business, and household sectors, including manufacturing and housing. The nature of business investment is evaluated relative to capital and technology intensity, scale, and overseas investment. In addition to investment in physical capital, investment in human capital and its contribution to economic development are also scrutinized.

When land is developed, one of the benefits is captured in the value of land. The chapter argues that while capitalization is a real benefit in some circumstances, it cannot be attributed to private development: rather it is a reflection of an improvement in social overhead capital. The chapter begins with a model of the economy that can be used to examine policy issues related to land and land values. The traditional view in welfare economics is that changes in land values should have no net effect on social welfare (as gains to gainers are offset by losses to losers). This view is challenged on the grounds that this applies only when benefits and costs reflect any externalities, i.e., impacts associated with non-market variables such as environmental quality. In the case of land development in crowded areas (such as large cities), it is argued that projects that lead to increased land values or rents impose an important external cost. While private benefits may be positive, social benefits may be negative. To the extent that private development increases transport costs and congestion, it should be taxed just as any externality.