From the late half of the 19690s, as a means of narrowing
the rural-urban income gap and promoting rural development,
this policy on rural development shifted towards the
enhancement of farm household income. Accordingly since the
late of the 1960s, applying the high farm price support program
and the fertilizer price subsidy program, the government began
to place emphasis on increasing farm household income.

Because small-scale farming is prevalent in Korea and its
farming system is expected to continue for long time in the
future, the price policy for agricultural products is not effective.
One reason is that the public funds transferred from non-farm
sector to agricultural sector through the subsidy program in
terms of per capita base of non-farm sector will be large
compared with advanced countries because a large proportion of
the total population in Korea still lives in rural areas.

Another reason is that the price elasticity for foodgrain
production in a small scale farming system is inelastic. Thus
from the early 1980s the main core of the farm income policy
was placed on the increment of non-farm income in rural areas
through rural industrialization. Even though the high farm price
support policy contributes apparently to increase farm income, it
accelerates the inflation. Thus because not only the economic
stability but also balanced regional development can be achieved
by the rural industrialization, as one of the non-inflationary
measures, the government has given policy priority on rural
industrialization.

The imbalance between rural and urban areas and among
regions has prevailed as the result of the past Korea's economic
development strategy which was mainly based on the large-
scale, urban - concentrated and capital - intensive manufacturing
industries. But we expect that the rural industrialization which
based on the development of small and medium industries can
create the rural non-farm employment activities for promoting
rural development and increasing farm income.

Several important policy measures for the effectiveness of
rural industrialization need to be pointed out.
1) In contrast to the relatively decentralized pattern of
industrialization in Taiwan and Japan, industrialization in
Korea has been concentrated in the Seoul and Pusan areas
(Seoul, Pusan, Gyeonggi, and Gyeong Nam areas)
2) Small commercial and service establishments, industrial
workshops, and homecraft activities have not been
developed in rural areas,
3) A depletion of human capital in rural areas has occurred
as a result of migration from rural to urban areas,
4) A modernized credit system has not been developed in
rural areas, and it has been extremely difficult to get
credit for rural non-farm activities, and
5) In contrast to the relatively well developed technical
infrastructure in primary cities, rural infrastructure has not
been developed.

Government efforts to solve above five problems should be
continued for the successful rural industrialization.

The government has offered every effort to increase
agricultural production for easing the shock from the poor crop
harvests in 1979 and 1980. Accordingly the production of the
crops included rice, barely vegetables and fruits except wheat,
soybeans, and feedgrains have been surplus. This production
policy has contributed considerable to expand and stabilize the
national economy in the early 1980s. But in recent years as the
self-sufficiency in stable food has been achieved, the structural
transformation of agricultural production sector is badly required
for efficient reallocation of production resources.

Ⅰ. Introduction
Ⅱ. Major Issues in Korean Agricultural Sector
Ⅲ. Policies for Increasing Farm Household Income
Ⅳ. Policy Options for Increasing Agricultural Production
Ⅴ. Summary and Conclusions