Why do post-developmental states, such as Japan, South Korea, and Taiwan, suffer from increasing inequality after the 1990s, although they maintained long-term low inequality under the slogan of “economic growth first, distribution later” during rapid industrialization period? My path analysis examines why incomplete redistribution mechanisms of the developmental state model maintained long-term low inequality despite weak welfare regimes with low social expenditures in rapid industrialization period until the early 1990s, and why they led to increasing inequality after that period. It highlights that developmental states’ narrow, asymmetric alliance with firms but without labor will not promote institutional efficiency in resource allocation in the stage of developed economies. This institutional inefficiency occurs because the exclusion of labor makes developmental states’ redistribution mechanisms incomplete and because the collusion between the state and large firms distorts resource allocations for the potential of economic growth. I argue that developmental states’ complete formula of (re)distribution must include not only the provision of public land-ownership, employment, and public education but also the institutionalization of welfare regimes.