KIEP Newsletter Vol. 5 No. 19

KIEP Newsletter Vol. 5 No. 19 | September 29, 2017 | Print

KIEP Surmounting Global Challenges, Creative Response! Korea Institute for International Policy (ISSN: 2288-0348)

KIEP PUBLICATIONS

The Effect of Restructuring on Labor Reallocation and Productivity Growth: An Estimation for Korea CHOI Hyelin, JUNG Sung Chun and KIM Subin / Working Paper 17-04

Productivity is considered one of the most important factors for economic growth. Total productivity grows through technological progress or reallocation of resources. This paper analyses their contribution to economic growth for total economy and by sectors. The main finding is that economy-wide increases but this is mainly due to internal technological improvements. On the one hand, inter-sector reallocation of labor negatively contributes to economic growth as employment moves to service sectors with low productivity. Further, when looking at the sectoral-level productivity growth, both internal and external restructuring make positive contributions to aggregate economic growth. However, internal technological progress and reallocation of employment appear to similarly contribute to the sectoral-level economic growth in the manufacturing sector, whereas internal restructuring makes a larger contribution to economic growth in the service sector. This suggests that there is more room for reallocation of resources to contribute to the productivity growth in service sectors. Therefore, the productivity growth of the service sector would foster economy-wide productivity and it can be achieved by the mitigation of misallocation of resources in service sectors.

China's Economic Ties with Southeast Asia OH Yoon Ah / World Economy Brief 17-18

In recent years, China has emerged as a key partner of Southeast Asia across trade, investment, and infrastructure development. Bilateral trade reached $395 billion in 2015, accounting for 15 percent of Southeast Asia's external trade and making China the region's top trading partner. The trade flows are strongly influenced by an extensive regional production network established across East Asia where China used to be the processing hub but now it is expanding its role to supply parts and components to Southeast Asia. China is the fourth-largest investor in Southeast Asia, although it only accounts for 7 percent of SEA's inbound FDI flows in 2011-2015. Its FDI flows to the region reached $6.4 billion in 2015. Infrastructure development is the most visible area of China's rising economic influence in Southeast Asia. Inadequate infrastructure is the major obstacle to accelerated and sustained economic growth in the region and China's infrastructure development initiative provides a new and unprecedented momentum for tackling this challenge.
External partners need to respond to the changing economic landscape in Southeast Asia proactively and constructively. China's deeper engagement in Southeast Asia may place competitive pressures on other foreign businesses and development partners, yet this may create more market opportunities and better infrastructure for everyone. External partners also need to pay greater attention to labor and environmental standards compliance in its FDI and infrastructure development in the region, taking lessons from some of the backlashes against China's investment activities. Finally, external partners and Southeast Asia share mutual interests in diversifying their economic relations away from over-dependency on China, as recent economic and security events have clearly suggested.

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