The Effects of Foreign Direct Investments on Major Economic Metrics: A Case Study of Post-Colonialism Republic of Korea

Abstract

This study gives an overview of the origins, development, and measured effects of foreign direct investments (FDI). This paper briefly covers the economic impact of Japan's rule over Korea from 1910 to 1945, but it mainly focuses on the time period between South Korea’s post-imperialism economy and the pre-pandemic market: roughly a 75-year time period from 1945 to 2020. This paper finds that foreign direct investment is strongly correlated with major economic metrics such as GDP, imports/exports, and consumer price indexes, especially in the most recent 20 years (2000-2020). These conclusions are based on data analysis using secondary data from the World Bank and supported by past literature. This study further theorizes that the recent economic success of South Korea is partially due to the major influence foreign direct investment has on economic prosperity through technology transfer. South Korea, a current powerhouse in the electronics industry through the early establishments of chaebols, a group of large family-owned conglomerates that dictated the early economic success of South Korea, would have significantly benefited from increased technological transfers. Therefore this paper’s data analysis focuses mainly on the 20 most recently available yearly data; however other periods are also briefly investigated.