I. Introduction
II. Literature Survey

III. Data and Methods

IV. Estimation
1. Basic Estimation Results
2. Domestic Debt Ratio Puzzle
3. Domestic Debt Thresholds by Individual Country

V. Concluding Remarks

References

This paper analyzes the determinants of domestic public debt crisis. There have been many studies that examine the causes and consequences of external debt crisis. However, little attention has been put to domestic debt crisis and the importance of it has been neglected. This is mainly due to two facts: First, the number of occurrence of the domestic debt crisis is less than that of external debt crisis, and second, the consistent database has not been constructed. Recently, many attempts have been made to construct database for domestic debts and domestic debt crises. This paper uses the database established by Panizza (2008), and tries to analyze the determinants of domestic debt crisis. We apply the panel probit model to determine the factors that cause domestic debt crisis and to find the debt thresholds of individual countries. The results of the paper show that many macro variables are important determinants of domestic debt crisis. Also, unless important macro variables are controlled, domestic debt ratio variable did not have significantly positive coefficient. This implies that the status of the macro variables determines the tolerable levels of domestic debt ratio, and that the countries have quite different levels of domestic debt ratio thresholds depending on their macroeconomic fundamentals. Thus, unless these factors are controlled, the comparison of domestic debt ratios between countries is meaningless.

The Trilateral Cooperation Secretariat that has recently convened in Seoul was a reminder of the purpose of this research, which is to discuss the role and functions of the Secretariat in further expanding the scope of trilateral cooperation and to ultimately achieve regional economic integration over the long term. The main benchmark for reference for this research is the Commission of the European Communities. In the 1950s, despite its political and security issues, Europe successfully established the ECSC, EURATOM, and the EEC under strong political leadership. Different from APEC and ASEAN, supranational authority were given to these international organizations which enhanced the enforcement of industrial cooperation programs and eventually led to the founding of the EU. Thus, the Trilateral Cooperation Secretariat should gradually expand its current functions and roles and ultimately pursue supranational authority. This should enable the Secretariat to respond more efficiently to factors that hinder regional integration and better contribute to economic cooperation in Northeast Asia. In this respect, this research presents guidelines for the Secretariat to enhance its roles and functions as follows.
First, the objectives of the Trilateral Cooperation Secretariat need to be more concrete and future-oriented, and the objectives must be stipulated within the joint statement of the Trilateral Summit. Under clearer objectives and supranational authority, the Secretariat should be able to reinforce cooperation among the three countries. In addition, the Trilateral Cooperation Secretariat needs to build a basis for controlling industrial cooperation programs among the three nations, as did the Commission of the European Communities. Over the long term, the Trilateral Cooperation Secretariat should transform into an executive commission as it expands its roles and functions.
Second, the Secretariat should facilitate regional integration by actively implementing the current and potential industrial cooperation programs.
Third, the Secretariat should focus on its role in achieving further institutionalization in regional economic cooperation. In the case of Korea, Korea's exports to China and Japan are rising continuously; thus the Korean government must make efforts to establish policies to increase market access by better protecting intellectual properties and to alleviate non-tariff barriers.
Fourth, the Secretariat needs to develop various policies and industrial cooperation programs that could alleviate factors which hinder regional cooperation. For instance, considering the importance of the nuclear cooperation issue in Northeast Asia, the Secretariat could initiate a 'Northeast Asia Atomic Energy Community' similar to EURATOM in Europe.
Fifth, in order to formalize the Trilateral Summit and successfully implement the industrial cooperation programs, the Secretariat should continue efforts to minimize factors which hinder trilateral cooperation. Therefore, the Trilateral Cooperation Secretariat should keep politics out at the initial stage.
Sixth, the Security Evaluation Report is in need of further development of mutual understanding of trilateral peace security issues.
Seventh, a 1.5 Trace Dialogue among China, Japan, and Korea is necessary for a more active discussion on security and regional issues in Northeast Asia.
Eighth, a multilateral security cooperation is crucial for strengthening future-oriented cooperation and ultimately to achieve economic integration.
Ninth, the three countries must develop and implement programs to enhance common values and identity among Northeast Asians. Organizing an East Asian Common Heritage by the Secretariat can be one option. Another idea is to install an exclusive airport of entry for Chinese, Japanese, and Korean citizens.
Tenth, in the short run, the Secretariat should pursue industrial cooperation programs which can help acquire supranational authority from its member countries. This should enable the Secretariat to improve the quality and operations of its industrialcooperationprogramsand allow China, Japan, and Korea to raise their economic cooperation to the next level.

Upon becoming the 24th member of the Development Assistance Committee of the OECD in November of 2011, the Korean government pledged to increase the ratio of its foreign aid relative to GNI to 0.25%, or US$3 billion, by 2015. Such increases in the amount of foreign aid from Korea has simultaneously given rise to the importance of qualitative improvement regarding its utilization.
As part of the effort to improve the quality of aid, this study explains experiment methodologies for measuring effectiveness of aid. Experiment methodologies are being adopted in light of numerous disappointments involving international aid. Given the circumstances, a researcher basing his or her work on experiment methodologies eschews broad and overly general concepts such as ‘economic development’ in favor of responding to specific issues such as increases in children’s school attendance rates. Experiment methodologies have recently received much attention from researchers in development microeconomics, and its impact upon measurement of aid efficacy has been significant. Thus it is vital that any official or personnel involved in foreign aid become acquainted with them. Experiment methodology basically involves the following process. The researcher randomly divides the participants into control and test groups. Treatments projects are given to the test group only, and the results of the actions of the two groups are compared after a certain amount of time. Although the process of an experiment appears straightforward, there are potential difficulties that may arise, such as attrition. This study covers the logical foundation of the experiment method, potential problems during an experiment, and possible solutions to the problems.
However, there will be cases such as disaster relief where the application of the experiment method would be morally unacceptable, and where the results from the same treatment may be different depending on the scale of the projects. This study concludes by outlining limitations of the experiment method.

I. Introduction

II. Model Setup
1. Basic Assumptions
2. Demand
3. Production
4. Cutoff Levels of Productivity and Worker Quality

III. Effects of Trade Openness on Unemployment: Second Period
1. New Cut-Off Levels of Worker Quality
2. Comparison of Worker Quality Between Groups
3. Structural and Frictional Unemployment

IV. Role of TAA in the Process of Intra-redistribution of Production Factors
1. The Need for a TAA Job Training Program Within a Sector
2. Sectoral Characteristics

V. Conclusion

References

This paper analyzes how TAA for workers plays a role on intra-sectoral redistribution of labor in response to trade liberalization by placing Riordan and Staiger’s (1993) TAA model within Melitz’s (2003) framework of international trade with heterogeneous monopolistically competitive firms. Due to the existence of asymmetric information of worker quality between firms and workers, high-productivity firms abstain from rehiring workers laid-off from low-productivity firms when the average quality of those workers is relatively low. Hence a job training program of TAA can have an important role in reducing unemployment and income deterioration in low productivity firms, and raise efficiency in high-productivity firms within a sector in response to trade liberalization. In addition, the job training program is more necessary with respect to the process of intra-redistribution of production factors when trade opens at a low level, and also when a sector has comparative advantage, skill-intensive technology and a large portion of low quality labor in the labor market.

 The cultural contents industry such as cinema, broadcasting, music album, game and publication is being considered as the major industry of the 21st century next to the heavy chemical industry in the 1970s and the semiconductor industry in the 1990s, and the cultural contents industry is growing rapidly to the point of recording 24.2% in the market increase rate of cultural contents industry whereas the economic growth rate of Korea is 5.7% in the past 9 years from 1999 to 2008.
 As Indonesia and Malaysia implemented effective economic development policies, Indonesia became a developing country through its increase in the national income per capita to $2,300 as of the end of 2009 and Malaysia is preparing to become a advanced country upon surpassing $6,700 in its national income per capita. The economic growth and the national income increase inevitably increase the demand and need for culture and related contents, thereby displaying the phenomenon of virtuous circulation of economy in which the growth and sales of related products rapidly increase.
The common characteristic of the industrial policy through economic development plan by Indonesia and Malaysia is that the percentage of manufacturing and service industries is continuously maintaining the level of over 40% out of the entire industry while concentrating on the cultivation on non-petroleum manufacturing industry after the 1980s from the petroleum & natural gas centered industrial policy of the past. Such economic growth, income level improvement and industrial structure change will go through the virtuous circulation structure of continuing on to supply increase together with the demand increase for cultural contents industry (broadcasting, music, cinema, game, etc.) and the cultural contents industry will continue to grow.
Meanwhile, the cultural contents industry of Indonesia is contributing 7.3% of the GDP as of 2008 according to Ministry of Trade and the cultural contents industry is being ranked at the top 8th in the industry of importance in the Indonesian economy while showing the average annual growth rate of 15%.
According to the data from Economic Planning Agency of Malaysia, the cultural contents industry of Malaysia is taking up 12.3% of the GDP as of end of 2008, and the cultural contents industry has been growing to the point of having become the top 5th industry of importance in the economy of Malaysia while showing the average annual growth rate of 18%.
The world broadcasting market is expected to show the average annual growth rate of 5.5% from 2009 to 2014 and the broadcasting & communication industry of Malaysia is also expected to show the annual growth rate of over 10%. One of the characteristics of broadcasting market in addition to the viewing rating is that the size of print media advertisement market is surpassing that of the TV market in double the size. This gap can be seen as the result from the limitations in the number of broadcasting stations for frequency circumstance for the broadcasting media whereas the advertisement media is diverse for the print media being issued according to race and language.
In the case of the Indonesian broadcasting industry, there are currently 11 national TV broadcastings and 60 regional TV broadcastings at the allowance of private sector participation in the broadcasting industry in 1989 and the majority of the broadcasting stations are mostly broadcasting the movies and dramas imported from the US, Chinese speaking countries, India, Japan and Korea instead of the self-produced programs. In addition, melodrama is forming the majority in the genre of preference and the dramas with clear good-evil confrontation structure is being preferred overall and the dramas added with a comic element are highly popular.
In the midst of the world music industry situation in which only the digital music industry is growing, the music album industry among the entire music industry of Indonesia is decreasing from the flooding of illegal replica whereas the digital music distribution market has a very significant growth potential despite its small market size as music albums started to be distributed through the Internet. In the case of the music industry of Malaysia, the overall music industry including the music album market is one of the most quickly deteriorating markets as it has reduced in size to about 1/3 compared to that in the mid 1990s when it was a period of market revival. Especially, it is being revealed that the market is receiving a serious impact from the drastic decrease in the sales of CD and cassette tape from 2005 to 2008 at the flooding of illegal replica.
In the midst of the predication that the world cinema market will record the annual average growth rate of 4.4%, the cinema industry of Indonesia started to actively grow since 1992 and 365 movies were produced from 1997 to 2008. In addition to the artistic value and originality of the Indonesian movies, it is showing continuous growth and advancement in the number of movie production, number of screens, commercial success revenue, number of audiences, etc. In the case of Malaysia, the cultural expenditure is also increasing from the economic growth and income level increase and it is showing continuous increase in the number of movie production, commercial success revenue and number of audiences except for in 2008 when the global financial crisis broke out.
In the midst of the prediction that the world game market will record the annual average growth rate of 5.5%, the percentage of mobile game and online game is expected to reach in the total of 28.3% by 2014 from increase compared to that in 2009 and the console game, arcade game and PC game that had been traditionally showing strong trend are expected to decrease in their percentage.
In the case of Malaysia, the size of online game market recorded $33.9 million in 2009 and it will reach $39.5 million in 2010, which is a growth by 16.5% compared to that of the previous year. In the case of the Indonesian game industry, the mobile game that takes up 20% of the game market and the online game that takes up 15% appeared since 2000 and continue to show rapid growth in Indonesia. Furthermore, the forecast for growth appears to be very bright as they are relatively less affected by the damages from illegal replica while the profitability is continuing to improve thanks to the structure of continuously receiving the usage fee according to the characteristic of game.

Recently, climate change and energy problems have surfaced as important issues. As such, since the 2008 global economic crisis, the green industry has risen as a new growth model, and many countries have been pursuing low-carbon green growth. In line with this current trend, LED (light-emitting diode) is in the limelight in many countries as the next-generation lighting device, as it is suitable to low-carbon green growth because it saves energy, is environment-friendly and high-efficiency, has a long life, and can produce diverse colors.
Beginning with the launch of the National Semiconductor Lighting Process in 2003, China has been actively and fully nurturing the LED industry. Since early 2009, it has been implementing the ‘Ten Cities Ten Thousand Lightings’ project to supply LED lighting products to 21 semiconductor lighting application model cities. On the strength of the Chinese government’s nurturing policy, the production output of the Chinese LED industry has continued to record an average annual growth rate of around 15%, and the market size has also been growing at an average annual rate of around 12%.
China has been nurturing the LED industry as a future strategic industry, so Korea, which is competing and cooperating with China, should be well-acquainted with China’s LED industry trends and nurturing policy. Also, the growth of China’s LED industry varies by region, so diverse approaches are needed when cooperating with or advancing into different regions. Existing researches on the LED industry in China are limited, however, to the introduction of development strategies and current status at the national level, and there are few literature on approaches by region. Thus, in this research, based on existing literature on the LED industry in China, the LED industry of the region of Jing-Jin-Ji(Beijing-Tianjin-Hebei) was analyzed via such methods as a literature review, a statistical analysis, a case study, and comparison with other regions. The following conclusion is arrived at.
First, Jing-Jin-Ji the pioneer region in mainland China’s LED industry, takes the lead in R&D for wafers and chips, but its research outcomes have been hardly industrialized, and few companies are engaged in packaging and application. In general, the market has not been properly formed, compared with the southern regions, and the production output of the LED industry in China is small but the volume of use of LED application products is greater than in other regions. The advancement of foreign firms into this region is poorer than in the southern region, where the LED industry is well developed. Accordingly, Jing-Jin-Ji still has more merits than the Pearl River Delta or Yangtze River Delta regions, which are already saturated, and this gives Korean LED companies the opportunity to pioneer in the market.
Second, with regard to advancement into the domestic production goods market, the degree of utilization of the import markets of Beijing and Hebei is very low, so exports to these two regions should be expanded. To achieve this, advance production localization and expansion of exports by strengthening market strategies can be considered.
Third, in the application areas, the largest future application market is expected to be the backlight market, which is anticipated to give the greatest opportunities to Korea’s electronics and semiconductor companies. Particularly in Tianjin the main business lines of which are IT and electronics, Korea should make the most use of its superior position in the LED TV industry. In the automobile LED lighting area, major automobile companies such as Beijing Hyundai Motors and Beijing Motors, which are located in Beijing, will have great advantages. With regard to LED lighting, it is desirable to preferentially advance into LED lighting application model cities such as Tianjin, Baoding, Shijiazhuang.
Fourth, with regard to cooperation with local companies, the display area is advantageous to Jing-Jin-Ji, and the wafer and backlight areas are worth the region’s consideration.
Fifth, in the early stage of advancing into the domestic LED market of Jing-Jin-Ji, it is desirable for the region to supply the goods to government-led projects such as the installation of LED streetlights, and to use such strategy to heighten awareness of the products and the company.
Sixth, the Korean government should expand its R&D investments in the LED area, reinforce financial support for the industry and tax benefits, actively nurture LED technological manpower and specialty enterprises, promptly expand national standards, and occupy international standards in advance to cope with severe competition with China in the future. At the same time, the LED industry nurturing policies of Korea and China coincide in many respects, so cooperation should be reinforced in areas such as R&D and human resources, mutual information exchanges, and network building through the holding of joint academic-industrial seminars.

The impact of trade liberalization is not limited to workers, firms, farmers, and fishermen. Communities in which these groups are located also experience massive layoffs and earnings losses. In this sense, this report examines trade adjustment assistance (TAA) programs for communities of the EU, Canada and the United States in order to derive practical policy implications out of it for the Korean government. TAA for communities is likely to be a useful channel which contributes to restructuring a regional economy if it is managed in proper ways. Community-initiation, efficient cooperation between central and regional government, transparency of program management, ex-post monitoring, and time-boundedness of supports are important factors that make TAA for communities successful. Especially, TAA for communities should be designed so that it contributes to a long-term economic restructuring plan of the region. 

2011
Conference Proceedings 7
2010
Conference Proceedings 8
Regional Study Series 8
Working Papers 9
SNU-KIEP EU Centre Research Series 12
2009
Policy Analyses 14
Confernce Proceedings 15
Working Papers 15
CNAEC Research Series 18
SNU-KIEP EU Centre Research Series 19
2008
Conference Proceedings 21
Working Papers 22
APEC Study Series 25
CNAEC Research Series 26
SNU-KIEP EU Centre Research Series 27
Monographs 27
2007
Korea’s Mid- to Long-Term Economic Strategy 28
Policy References 28
Working Papers

The Korea Institute for International Economic Policy (KIEP) was founded in 1990 as a government-funded economic research institute. It is a leading institute concerning the international economy and its relationship with Korea. KIEP advises the government on all major international economic policy issues and serves as a warehouse of information on Korea’s international economic policies. Further, KIEP carries out research by request from outside institutions and organizations on all areas of the Korean and international economies by request.

I. Introduction 

II. Basic Model and Database 
1. Basic Model 
2. Estimation Equation and Database 

III. Estimation Results 
1. Estimation for the Pooled Data  
2. Estimation by Regional Groups 
3. Estimation by Sectoral Groups 
4. Relative Strength of Competing Models 

IV. Conclusions 

References 

Appendix 
 

This paper derives a consolidated regression equation to estimate the sources of comparative advantage; integrating the Heckscher-Ohlin model, the Ricardian model, and the gravity model. It also aims to test which of the three competing models better explains the bilateral trade flows. For the empirical estimation, it sets up a consistent dataset for 65-countries and 42-industries in 1997, 2001, and 2004.
The estimation results generally confirm the three competing models, but relative strength of the Heckscher-Ohlin model turns out to be the most potent, followed by the gravity model, and the Ricardian model. The results reveal that the signs of the estimates such as production factors and total factor productivity are positive in all significant results. In addition, the gravity variables including the distance variable and dummies such as borders, languages, colony, and FTA explain the changes in trade share very well.
The explanatory power of the three competing models turned out to be different depending on sectoral and regional groups. A sign for the capital turned out to be negative in case of regressions for the natural resource intensive sector, but they are not statistically significant. In case of the Ricardian model, this paper does not indicate that technological difference is statistically significant for the sectoral groups. It is interesting to see that the sign of the colony dummy for developed countries, other European countries, and Central America turned out to be different from the prediction.

 

2011
Conference Proceedings 4
Policy References I (in Korean) 5
Journal of East Asian Economic Integration 5
2010
Policy Analyses (in Korean) 6
Conference Proceedings 8
Studies in Comprehensive Regional Strategies
(in Korean) 9
Regional Study Series (in Korean/English) 10
Trade and Investment Study Series (in Korean) 10
Policy References I (in Korean/English) 10
Working Papers 16
CNAEC Research Series (in Korean) 17
SNU-KIEP EU Centre Research Series 18
Journal of East Asian Economic Integration 18
2009
Policy Analyses 19
Policy Analyses I (in Korean) 20
Conference Proceedings 22
Korea’s Mid-to Long-Term Economic Strategy
(in Korean) 22
Studies in Comprehensive Regional Strategies
(in Korean) 22

The Korea Institute for International Economic Policy (KIEP) was founded in 1990 as a government-funded economic research institute. It is a leading institute concerning the international economy and its relationship with Korea. KIEP advises the government on all major international economic policy issues and serves as a warehouse of information on Korea’s international economic policies. Further, KIEP carries out research by request from outside institutions and organizations on all areas of the Korean and international economies by request.