Credit misallocation in Korea worsens economic performance of favored industries.
The article "Credit Allocation and Financial Crisis in Korea" examines how credit was distributed in the Korean financial sector over the past 30 years. The researchers studied data from 32 manufacturing sectors and found that credit did not go to the most profitable industries, both before and after financial reforms. They also discovered that this misallocation of credit did not help the favored industries perform better economically over time.