Even though institution has not been analyzed as the main determinant inthe traditional economic growth model, institution could affect the economicgrowth and development when the country’s economic environment ischanged. Korean economy has experienced many economic environmentalchanges since 1990 and institutions could be one of the important constraintsin Korea’s economic growth.In this paper, we analyze the determinants of Korea’s stagnated economicgrowth in the aspects of institutional economics and suggest the strategies forthe economic development of Korea. In the short-term, new industrial policyshould be constructed to improve the new growth engines’ competitiveness andnew pension system should be established to stabilze worker’s wage. In themid-term, it is important to change the wage and employment structures inorder to improve the early retirement system.