E-commerce is the sale or purchase of goods or services over the Internet or computer network. Despite the importance of e-commerce market, existing papers in Korea have only covered with basic analysis including the size and growth of e-commerce market in Korea. We do not know whether e-commerce activity substitutes or complements existing trade in goods, or whether it creates or destroys jobs. More fundamentally, we do not know the differences between e-commerce firms and non-e-commerce ones.
  The first goal of this study is to characterize the e-commerce market in Korea. To show the characteristics of e-commerce market in Korea, we collect the 2010-2016 e-commerce data provided by the Korea Customs, the online shopping trend survey from 2000 to 2016 by the Korea Statistics, and the 2000-2016 reports (including micro-data from 2013 to 2015) from National Information Society Agency, the e-commerce reports and data from 2010 to 2015 by the US Census, and other referenced data in reports including UNCTAD and market agencies. We have carefully summarized and compared the latest trends and features of the e-commerce market in Korea, having the scope of each dataset in mind. We also provides some caveats in interpreting figures in e-commerce import and export data from the Korea Statistics and the Korea Customsin order not to misguide readers in interpreting the different values between them. Many interesting features of the e-commerce market in Korea are included in the study.
  This study aims to characterize global B2C e-commerce by firms in Korea and to examine the impact of e-commerce on international trade. Using export statistics through e-commerce provided by Korea Customs, we reportthe proportion of SMEs engaging in global B2C e-commerce exports is high compared to that in traditional exports in goods. The total volume exported through e-commerce has been rapidly increasing while the price of goods in e-commerce transaction has been decreasing since 2014. Traded goods via e-commerce consist of mainly consumption goods. They are replaced more frequently compared with traditionally traded goods. Next, we examine the relationship between digital intensity and international trade by using, in industry-level, digital intensity as a key independent variable and total export value as a dependent variable (which is decomposed into average export value and number of goods and ICT development index as one of the control variables. We show that the higher the digital intensity, the greater the total export (as well as average export value and number of goods), implying that e-commerce has a positive impact on exports in goods.
  This study also aims to examine the impact of e-commerce on employment by using the Korea Census. We conduct empirical analysis at industry-level and firm-level. At industry-level, we build variables for job creation and destruction of Korea (Davis and Haltiwanger 1992) and digital intensity and do the OLS and Quantile regression. We find no evidence that there is a relationship, on average, between digital intensity and employment growth rate/job creation in manufacturing. This holds true in different quantiles. On the other hand, there is a positive relationship, on average, between digital intensity and employment growth rate/job creation in services industries. Lastly, we find that there is no relationship between digital intensity and job destruction in both manufacturing and services industries.
  At firm-level, we construct a new dataset from the Korea Census by using propensity score matching technique (in which propensity scores are generated by logit model) in order to relieve endogeneity issue arising from e-commerce variable. We find that e-commerce firms have, on average, higher employment as well as total compensation than non-e-commerce ones. However, we also find that labor compensation per capita in e-commerce firms is largely equaled to or lower than that in non-e-commerce ones, which implies that the increase in total labor compensation at e-commerce firms is mainly driven by employment increase. At firm-level, e-commerce activity has a larger positive impact on employment in manufacturing industries but no impact on agriculture, whereas it has a positive impact only on temporary workers in services industries.
  This study provides policy implications for enhancing e-commerce market of Korea as follows: (1) promoting SMEs to engaging global e-commerce export, (2) streamlining customs clearance process for e-commerce, (3) strengthening consumer protection related to e-commerce transaction, (4) international cooperation to enhance global e-commerce, (5) expanding education, vocational training, and retraining programs related to e-commerce, and (6) building comprehensive panel data for e-commerce.
 

  A high number of trade remedy measures can be regarded as a representative of protectionism. Over the last ten years, both developed and developing countries have increased the number of trade remedy measures mainly on products in metal, chemical, rubber, and plastics industries. In particular, the U.S. has targeted steel products exported by Chinese manufacturers since 2010. This particular fact raises serious concerns since many steel products exported by China that the U.S. has targeted in its national market are being overlapped with those exported by Korean manufacturers. Further, due to that the Korean economy has heavily relied on international trade in goods with the rest of the world, firms in various industries, governmental officers, policymakers fear negative trade and welfare effects of increased trade remedy measures by the U.S. and the rest of the world.
  This study aims to investigate the economic impact of trade remedy in a general equilibrium model with world input-output linkage by quantifying the trade and welfare effects from trade remedy measures. Before examining the economic impact of trade remedy, we investigate the impact of anti-dumping initiations on trade cost by focusing on the steel industry for the last five years. We conduct the fixed-effect as well as PPML estimation in a panel dataset constructed with anti-dumping initiation records, HS 6-digit product-level trade data among 15 countries for the last five years, tariff-lines, usual control variables used in gravity model provided by CEPII, and other relevant variables. We find that anti-dumping initiation in previous year has a negative impact on trade volume in current year. This key result provides a rationale of the study assuming that strengthening trade remedy measures increases trade cost.
  The main results of the study can be summarized as follows. First, the increased trade remedy measures in the world over the last decade has reduced the Korea’s welfare by 0.167%. The 0.167% reduction in Korea’s welfare can be decomposed to changes in terms-of-trade and changes in trade volume of Korea. It turns out that the change in the Korea’s welfare is the sum of 0.254% fall in trade volume and 0.087% rise in terms-of-trade. Changes in trade volume of metal and chemical industry contribute the change in total trade volume by 30.2% and 16.2%, respectively, in Korea.
  Second, after examining economic impact of increased trade remedy measures on Korean steel by the U.S. (or China) ex ante, we find that increased trade remedy measures by the U.S. (or China) worsens Korea’s welfare. The decrease in Korea’s welfare is largely attributed to the change in terms-of-trade of Korea, rather than changes in trade volume of Korea. The deterioration of Korea’s terms-of-trade mainly comes from changes of terms-of-trade among Korea, the U.S. and China, rather than the rest of the world (the world minus the three countries). It is interesting to find that, given the degree of intensity of trade remedy measures by the U.S. or China, China exerts much more stronger trade-and-welfare effects on the Korea economy than the U.S.
  Lastly, we quantify the economic impact of the U.S trade remedy measures on goods exported by Korean manufacturers in case of U.S-China trade war where the U.S imposes trade remedy measures heavily on goods exported by Chinese manufacturers and China retaliates to the U.S trade policy. The study finds that there is a possibility that the Korean economy might benefit from the U.S-China trade war if the U.S. has no further import restriction on goods exported by Korean manufacturers. However, if the U.S. takes actions by imposing additional trade remedy measures on goods by Korean exporters, the Korea economy suffers from serious reduction in trade volume and welfare.
  Based on the main results of the study, we provide several policy implications to cope with increased and intensified trade remedy investigation (or measures) around the world at international-level, multi-country-level, government-level, and firm-level. 

  The aim of the research is to suggest policy implications and proposals to expand bilateral industrial cooperation between Korea and Iran focusing on the petrochemical and automobile sectors that occupy the largest share of the Iranian manufacturing industry.
  Chapter 2 touches upon the political and economic trends, international relations, and economic policies in Iran in order to understand the recent changes in both economic and political spheres of the country, analyzing Korea-Iran economic relations. Contrary to expectations for a rapid economic recovery after lifting the international sanctions against Iran in January 2016, foreign direct investment inflows to the country have continued to remain sluggish and the unemployment rate has remained high. A ban on Iranian access to U.S. dollar transactions as prescribed under the primary sanction and the worsening relationship between the U.S. and Iran after President Donald Trump came into office have become key factors which undermine investors’ confidence. On top of this, the stability of Iran’s macro-economic conditions is recently being threatened mainly by the high inflation rate and steady rial depreciation. Upon this backdrop, economic relations between Korea and Iran have greatly expanded, mainly in the trade and construction sectors.
  Chapters 3 and 4 deal with the policies, structure, characteristics of Iranian petrochemical and automotive industries. Iran’s NPC (National Petrochemical Company) performs the pivotal role of producing petrochemical products as well as regulating the petrochemical market. Iran’s petrochemical complexes are mainly being developed in special economic zones at Mahshahr and Assaluyeh with 58 petrochemical complexes under construction that are expected to produce 134.4 million tons of petrochemicals per annum. The Iranian government has designated the petrochemical sector as a strategic industry through its fifth and sixth 5-year development plans and is pushing for policies such as privatization, expansion of production facilities. The Iranian government also provides cheaper feedstock, tax exemption and deregulation on petrochemical companies in special zones in order to induce foreign direct investment in the petrochemical sector. After the economic sanctions against Iran were lifted, French and German companies showed strong commitment to invest in the Iranian petrochemical sector, reflecting high expectations for Tehran’s development policy and high growth potential. However, due to the uncertainty in international relations surrounding Iran and difficulties in financing, global companies’ willingness to invest in Iran has weakened.
  Following the lifting of sanctions against Iran, the largest auto-producing country in the Middle East, car production has been recovering since 2013. The Iranian government is actively moving to foster its automotive industry, focusing on inducing foreign direct investment and promoting transfer of technology with high tariffs on imported cars. Iran is trying to become an automobile manufacturer with advanced technological foundation rather than a CKD (completely knocked down) assembler. With the rise of Chinese companies and re-entry of French and other European firms in the Iranian auto market, competition in the market is expected to be intensified. In addition, there are interior and exterior risk factors such as the existence of the primary sanction imposed by the U.S., and the volatility of Iran’s regulatory policies.
  Chapter 5 presents specific cooperative projects by comprehensively assessing the industrial environment of the petrochemical and automotive sectors. Given the risks stemming from uncertainty in U.S.-Iran relations, bilateral cooperation should be approached strategically in division of the short-term and the long-term. This study presents specific measures focusing on collaborative projects that could be implemented in the short term. In the petrochemical sector, first of all, advisory service projects to transfer the production system of high-value-added petrochemicals could be explored. Second, Korean companies could be an operations and maintenance service provider in the Iranian petrochemical sector, participating in petrochemical plant construction projects initiated by Korean construction companies. Third, exchange program of engineers and experts in both countries’ petrochemical sectors could contribute mutual understanding of bilateral industrial cooperation and future joint ventures in the sector.   The projects could be carried out more effectively through high-level government cooperation between the two countries.
  In the automotive sector, it is necessary to focus on high-tech components and automotive software development rather than large-scale investment projects as cooperative projects that could be implemented in the short term. Given negative impacts that could be imposed on large scale projects due to uncertainty of U.S.-Iran relations, small and medium-sized enterprises could participate in those projects. Second, a technical advisory program utilizing retired but experienced Korean engineers could be considered as a tool for technology transfer. Such an exchange program could benefit both countries, as Korea can create jobs for retired engineers and Iran could improve its technological knowhow and cultivate skilled manpower. Third, considering the uncertainties in the Iranian market, an intergovernmental channel for enterprise support could be established to find solutions to corporate disputes in joint projects. Fourth, the Korean and Iranian governments could promote cooperation for transfer of Korea’s standardization systems to Iran that could be beneficial to bilateral cooperation in terms of technology transfer and job training. 

  Since 2015, the Chinese government has been strongly promoting its “Made in China 2025” initiative, which aims to accelerate the transformation of China from a “big manufacturing country” into a “world manufacturing power” by boosting manufacturing competitiveness through innovation and nurturing high-tech manufacturing industries. China’s “Made in China 2025” strategy is both a threat and opportunity for Korea. This study aims to analyze the development status of Chinese manufacturing industries and the policy of “Made in China 2025,” and to provide implications and countermeasures.
  As a threat, first, “Made in China 2025” could hurt existing manufacturing powers such as Korea, an economy heavily dependent on Chinese exports, by promoting import substitution in the manufacturing industry and increasing global market share. Second, the preferential benefits and financial support provided by “Made in China 2025” to local companies could be used to fund overseas technology and acquisitions, which could lead to difficulties in protecting domestic companies. Third, if “Made in China 2025” leads to excessive investment and redundant investment in specific technologies and industries, it could cause problems such as overproduction, overcapacity, and price collapses around the world. Fourth, if China adopts a policy to prevent foreign companies from entering the domestic market and nurture high-tech new industries through “Made in China 2025,” new trade disputes could increase and pose obstacles for foreign companies.
  As an opportunity, first, “Made in China 2025” can create demand for software and equipment in a vast ICT field centering on the new growth high-tech industries: next-generation information technologies, new energy vehicles, high-performance machine tools and robots. Second, the expansion of open-door policy in “Made in China 2025” – such as negative list type foreign investment; safe, transparent and predictable management environment; trade facilitation; industrial adjustment of the steel, chemical, ship sectors through opening up; and support for overseas expansion of the high-speed railway, electric power equipment, and construction equipment sectors – could increase new business opportunities for foreign companies. Third, each region in China is promoting “Made in China 2025” and this could lead to international cooperation in several sectors based on regional differences in the level of manufacturing development, the industries each region specializes in due to their comparative advantage, and the core industries of “Made in China 2025” by region.
  In addition, this study analyzes the Chinese manufacturing industry’s development status in terms of industrial structure and trade structure, using indicators related to China’s manufacturing industry, import and export data, and indicators of localization. First, the results of our industrial structure analysis show that the Chinese manufacturing industry has been actively developing under the Chinese government’s aggressive policy of promoting and investing in the high-tech manufacturing industry. The mid-high technology and high technology sectors’ sales ratio has increased over the past 10 years and R&D investment expenditure on high-technology has increased as well. Second, our analysis of the trade structure shows that the export comparative advantage of China has generally increased regardless of the technology level, but the high-tech sector has been stagnating recently. In addition, import substitution has been progressing at a rapid pace due to the expansion of production and procurement of general intermediate products in China. These results provide the following implications. First, the development status of China’s manufacturing industry and “Made in China 2025” show that the mid-high and high tech industries and new industries related to the 4th industrial revolution are developing remarkably. Therefore, Korea can expect to be fully exposed to competition with China in these areas. Second, from the perspective of technology levels, China’s recent advancement in high-tech and medium-to-low technology industries is remarkable, but high-tech sectors are showing signs of being stalled or delayed. It is unclear whether China will be able to achieve the goal of developing its own technologies and product competitiveness in these sectors as rapidly as planned.
  In addition, this study analyzes the effect that the recent development in China’s manufacturing sector has had on Chinese global value chains (GVC), employing a GVC analysis based on WIOD and ADB data. As a result of the analysis, the proportion of intermediate goods in the Chinese domestic market has increased significantly in the areas of textile manufacturing, clothing and leather manufacturing, computers, electronics, and optical product manufacturing (by industry), and in mid-high manufacturing (by technology). The proportion of gross exports’ overseas value-added has declined gradually and dependency on foreign countries has decreased. We also confirmed that China has been shifting from a rear to front position in the GVCs, as its GVC participation based on vertical specialization has decreased. Also an analysis of China’s exports to Korea － mainly in the manufacturing of electrical and optical components, chemical and chemical products, and primary metal and metal processing industries, which account for a large trade volume between Korea and China － shows that China’s GVC participation rate decreased while Korea’s position in GVCs has relatively increased as the overseas value-added portion of its intermediate goods declined. The increase in intermediate goods imports due to China’s economic growth was greater than the import substitution of intermediate goods, which had no negative impact on Korea’s intermediate exports to China.
  This study also confirms changes in the status of China’s global value chains by analyzing the intra-Asia trade network using the international trade data of major industries. The results indicate a Chinese “centrality,” in which most intra-regional trade relations were linked through export or imports from China, in the textile and apparel and mobile phone intra-regional trade networks. In other words, our results confirm that the scope of China’s intra-regional specialization structure is gradually expanding upstream of the value chain. Meanwhile, in the automotive industry, China still has not become a leading player in GVCs. And the centrality of China weakened in 2007-2015 as other Asian countries formed new intra-regional trade relations that did not go through China. The implications of the analysis are as follows. First, there is a clear distinction between industries in the intra-regional trade network structure, and these inter-industry differences provide the implication that differentiated strategies for each industry will be needed to respond to the emergence of China. Second, the expansion of China’s centrality and role in the value chain is being led by foreign capital firms. Third, the emergence of the new intra-regional trade network is the result of a reorganization in the intra-regional specialization structure, as the Korea-China-Japan-based specialization structure centered on Northeast Asia expands to other regions in Asia such as Southeast Asia and South Asia.
  This study seeks the countermeasures of Korea in response to the above opportunity and threat factors. The countermeasures against the opportunity factor of “Made in China 2025” are as follow. First, we should pay attention to the huge demand that China will create by fostering new-growth industries in the “Made in China 2025” initiative. The Korean government should selectively support the technology development of small- and medium-sized companies that possess global competitiveness in the parts, materials and equipment sectors, and strive to secure their sales network in China. Second, it is necessary to actively seek Korean companies’ entry into China by utilizing the internationalization of “Made in China 2025” and further opening up of the Chinese capital market. Innovative ICT venture entrepreneurs can increase their chances of success by cooperating with rich funding partners and the broad market in China. We can also consider entering into the Chinese market through preemptive mergers and acquisitions (M&A), equity investments, and joint ventures with promising Chinese companies in new growth industries. Third, Korea should select “key cooperation areas and fields” in each region of China and seek for entry through selection and concentration. In particular, it is necessary to seek strategic entry into regions with high demand for economic cooperation with Korea but with little competition between domestic and foreign companies.
  The countermeasures against the threat factors of “Made in China 2025” are as follows. First, China’s import substitution and expansion of global market share are inevitable developments, but China still imports core parts and technology from overseas. Therefore, we need to steadily develop high technology, high quality and high value- added products and identify opportunities within China’s fostering of new growth industries and expansion into the global market. Second, there is a possibility of domestic technology and company leakage due to China’s aggressive M&A strategies, but M&A can also be one of the ways for Korean companies to enter the Chinese market. Third, there is the possibility of global overproduction due to the concentration of resources in specific industries and technologies in “Made in China 2025.” Therefore, when the Korean government and industry establish their market supply forecast, facility investment plan, and future strategy, they should take into account the future supply of major industries supported and nurtured under “Made in China 2025” and study the impact on future global markets. Fourth, as the preferential benefits, financial support, and trade barriers provided to local companies under “Made in China 2025” could have a market distorting and deteriorating effect on the competitiveness of foreign capital companies, we will have to continue monitoring the various subsidies for local enterprises and other support measures by China to seek appropriate response measures.
  There is also a need for countermeasures against changes in China’s industrial and trade structure. First, China’s manufacturing industry has a wide development gap by industry and technology. Therefore, Korea should design differentiated responses by industry, product, and technology levels. Second, the Chinese manufacturing industry has reached a certain limit in its global market share, especially in the high-technology sector. And this suggests that we need to understand the status of global market share and future market share forecasts for the Chinese manufacturing industry and seek the detailed countermeasures. Third, although import substitution is proceeding in line with China’s expansion of intermediate production and procurement, it should be noted that this trend is also large in terms of industry and product variances, and a countermeasure strategy should be prepared in light of this. In addition, as China’s core components and technologies are still highly dependent on foreign companies, it is necessary to maintain the mass exports of intermediate goods through the development of high-technology, high-quality and high value-added products.
  The countermeasures against the GVC phase change in Chinese manufacturing can also be considered as follows. First, we must develop new industries and new products through sustainable innovation, protect core technologies and technicians who possess competitiveness while maintaining differentiated technologies, and make China’s rising in GVC an opportunity for us. Second, regional manufacturing GVCs are likely to be led by China, but the centrality levels of China show big differences depending on the characteristics of each industry and product. Therefore, we should study how GVCs centering on China will form in the new-growth industries of “Made in China 2025” and how Korea will participate in these industries. Third, the expansion of China’s role in the GVC does not necessarily indicate a central role being played by Chinese local companies or a shift to high value-added areas; the role played by foreign companies is still important. Thus companies should position themselves to utilize and benefit from China’s expansion. Fourth, with the Korea-China-Japan-based specialization structure being expanded to other regions in Asia, such as Southeast Asia and South Asia, and the intra-regional specialization structure undergoing a reorganization process, a new intra-regional trade network has emerged that does not have China as its main axis. We should actively seek out third countries as our future production base and consumer market.
  Government policy to respond to development in the Chinese manufacturing sector is important. However, the policy-making must be designed from the initial stage to be bottom-up, sector-specific, in which industry and industry experts participate. In addition, the government should prepare policies to foster long-term new growth industries for the next 30 years and cope with “Made in China 2025” and the 4th industrial revolution. It will be essential to establish a neutral and independent control tower that will consistently promote industrial policy, regardless of political changes. Related government departments, research institutes, and industry associations should participate in the project to act as a control tower where information is shared on China’s development status, policy changes, and future prospects, and appropriate countermeasures are taken. 

  The purpose of this study is to construct a model that can analyze growth effects to explain the impact that economic integration between North and South Korea will have on both economies. The first chapter explains the background and purpose of this study and how it differs from previous studies in terms of methodology. While inter-Korean economic cooperation projects have been regarded as new economic growth opportunities by every past administration, only a handful of studies have been conducted to estimate the resulting economic effects. The purpose of this study is to estimate the economic growth effects of inter- Korean economic cooperation on both sides of North and South Korea and to identify implications for inter-Korean economic cooperation to maximize the interests of both economies. Methodologically, these points that the Solow growth model is used, the economic growth effect is estimated by taking into account various economic cooperation projects and policy variables, and the dynamic effect of the period is analyzed are evaluated as a distinction from previous research.
  In Chapter 2, the inter-Korean economic integration is divided into short-term inter-Korean economic cooperation projects and mid- to long-term progressive unification, and a model is developed to quantify it and a method to evaluate the growth effect of economic integration is suggested. The basic economic model of inter-Korean economic cooperation assumed the Cobb-Douglas production function in the form of a Solow growth model. The difference between the North and South models is that infrastructure development is separated from capital and constructed as a variable independently, and that North Korea's productivity growth rate changes according to the labor and capital exchanges arising from the process of inter-Korean economic cooperation are internalized by functions in the model.
  The gradual unification scenario was composed by reflecting five major issues in the basic model. A declining growth rate due to excessive government debt, increase in the cost of disruption in South Korean society due to the movement of North Koreans to the Southern region during the unification process, increase in the working population due to the reduction of military forces in North Korea, and support provided by the South Korean government for social security costs in North Korea are applied at different stages depending on the stage of gradual unification. On the other hand, the growth effect of the inter-Korean economic integration is calculated by summing up the difference between a scenario where economic integration is pursued and one where it is not.
  Chapter 3 examines short-term and long-term economic integration scenarios. First, the seven major economic cooperation projects – the Kumgang Mountains project, Kaesong industrial complex project, light water reactor project, South-North railway and road connection project, Han River estuary joint use project, shipbuilding cooperative development project, and the Dancheon area underground resource development project – were selected for closer examination. Labor, capital investment, and infrastructure development proceed differently depending on economic cooperation, with the Kaesong industrial complex project, South-North railway and road connection projects corresponding to labor-intensive economic cooperation projects, and the light water reactor project and South-North railway and road connection projects, which account for more than 80% of infrastructure development during the capital investment stage, were found to be infrastructure-intensive economic cooperation projects. In terms of business duration, projects such as the Kumgang Mountains project and Kaesong industrial complex project are planned for continuous expansion over 30 years according to the development plan. On the other hand, projects such as the infrastructure-intensive economic cooperation projects will show a great reduction in the business scale once the initial construction stage has been completed.
  Meanwhile, the progressive unification scenario was designed as a mid- to long-term scenario conducted in three stages over a total of 30 years. The first stage is assumed to be the simultaneous implementation of the seven major economic cooperation projects, while the 2nd and 3rd stages are assumed as a simultaneous expansion of these projects at a two-fold and three-fold scale, respectively. At the same time, considering the five issues listed above, it is assumed that the growth of South Korea's GDP will be reduced by the increased burden of government debt in the first stage. In the second stage, it is assumed that a decrease in gross domestic product will occur due to the increase of North Korea’s government debt, the increase in the North Korean working population due to the decline of its army, and the North Korean regional wage subsidies. In the last third stage, it is assumed that all five factors are applied, including the cost of disorder in South Korean society due to the migration of North Koreans to the South Korean region, and the cost of welfare expenses in the North.
  Chapter 4 measures the economic growth effects of short- and long-term economic integration scenarios. According to the results of short-term scenario analyses, economic cooperation projects with the highest growth potential for South Korea were the Kaesong industrial complex project (159.2 trillion won), Kumgang Mountains project (4.12 trillion won) and the Dancheon area underground resource development project (4.08 trillion won). In the case of North Korea, the South-North railway and road connection projects (92.6 trillion won), Kaesong industrial complex project (51.3 trillion won), and Dancheon area underground resource development project (34.3 trillion won) showed the highest growth potential. The combined effect of growth for the two Koreas came in the following order: the Kaesong industrial complex project (210.6 trillion won), North-South railway and road connection project (94.2 trillion won), and the Dancheon area underground resource development project (38.5 trillion won). In sum, in South Korea, labor-intensive businesses have a large economic growth effect, and North Korea's economic growth effect is significantly influenced by productivity growth.
  According to the results of mid- and long-term scenarios, South Korea will gain 346.6 trillion won (annual average 14.2 trillion won) in growth effects, North Korea 416.9 trillion won (annual average 27.6 trillion won), and North and South Korea will gain a collective total of 763.5 trillion won (annual average 41.7 trillion won) in growth effects. Compared with a scenario where economic integration is not implemented, the gross production gap between North and South Korea decreased from 51.0 times to 19.8 times and the productivity gap decreased from 11.1 to 7.4 times by the year 2047. Meanwhile, if the effects caused by the five issues are examined separately, the effects in South Korea are not significant, while the North Korean case shows that the total production of North Korea increased by more than 50 trillion won, from 146.6 trillion won to 196.6 trillion won.
  In Chapter 5, based on the results of the research, the implications, performance and limitations were examined. The first implication for the economic cooperation is that it is necessary to plan the project in a more long-term and comprehensive manner, considering the fact that the economic growth effect varies greatly depending on the business aspects of the economic cooperation between two Koreas. The second implication is that, considering the growth effect of South Korea is relatively low in some economic cooperation projects, it is necessary for North Korea to establish a business plan to utilize the labor force of North Korea. And the last implication is that it will be wise for North Korea to effect a change in the form of its economic cooperation projects by directly participating and obtaining the resulting products of economic cooperation, rather than simply supplying its labor force.
  The main results of this study are as follows: first, by constructing the analysis model for economic integration on North and South Korea, the effects of economic integration on North and South Korea were estimated simultaneously, and economic cooperation and unification estimated with the same model; second, the effect of inter-Korean economic cooperation on North Korean productivity was internalized within the model; third, the main variables for evaluation of the North Korean economy were provided; and fourth, through these analyses we propose the economic cooperation projects most likely to maximize the economic growth of the two Koreas.
  Meanwhile, further research will be necessary to supplement the data used for the variables in the growth model, to improve the function we use and to provide further evidence, this being an initial study to internalize productivity. Further considerations will have to be made for the foreign economic relations of North Korea, such as trade and foreign direct investment, and incorporated in the model, and further economic cooperation projects must be developed and analyzed in addition to the seven major economic cooperation projects. 

  Labor intensive industry-oriented export strategy (beginning in the 1970s), which once led to successful industrialization and economic growth, seems to have lost its effect in a situation where export expansion does not lead to job creation. The fact that exports do not create sufficient jobs is a problem faced by the Korea as a manufacturing-based export-driven economy. In Korea, which is highly dependent on exports, it is important to look into the main reasons why the virtuous circle between exports and employment has weakened considerably.
  This study begins with the question of what is the main reason why export growth does not lead to sufficient job creation, and examines the relationship between exports and employment from various perspectives. In Chapter 2, we applied the growth accounting method to decompose the changes in employment induced by exports into the scale and composition effects on employment, so that it captures the employment effect caused by the changes in the composition of export products. From this analysis, it can be seen that the reduction in the employment effect of exports is highly correlated with the changes in the composition of the export products toward less labor-intensive.
  From the empirical analysis using industry-level data (Chapter 3, section 1), it is confirmed that the higher the capital intensity, the lower the export elasticity of employment. Another interesting founding is that the export elasticity of employment is higher when the export proportion of SMEs (or final consumption goods) is larger. This indicates that, other things being equal, the exports of final consumption products by SMEs is effective in creating jobs. This is the result of emphasizing the role of government policies to encourage the participation and promotion of exports led by SMEs. In section 2, the main founding is that the higher the service industry’s upstreamness index, the higher the employment of the service industry from the manufacturing exports. This result emphasizes the role of service industry as a manufacturing intermediate inputs in shaping a relationship between manufacturing exports and service employment. It means that the service-employment effect of manufacturing exports is high in service industries with high upstreamness index (i.e., non-financial intangible asset services, financial related services, IT related services, employment and business support services).
  In the preceding industry-level analysis, we have seen that the employment effect of exports has weakened as the comparative advantage industry shifts from labor-intensive to labor-saving. It should be noted that there is necessary to recognize that there is a limit to the implementation of industry-level policies in that the weakening of the virtuous circle between exports and employment is the results of the efficient allocation of resources among industries. In this context, we looked into, in Chapter 4, the firm-level data by paying attention to allocation of resources among firms within the industry: (1) employment effect of exports, (2) employment effect of domestic firms' export participation, and (3) employment effects of exports by firms’ characteristics.
  The results of Chapter 4 are summarized as follows: First, there is a positive association between exports and the employment of permanent workers. Second, the employment effect of exports to non-affiliates was found to be more effective than those exported to related firms(i.e., foreign affiliates). Third, the empirical analysis including firms’ characteristics shows that the higher the R&D intensity, the higher the employment effect of exports. Fourth, a positive association between the export participation of domestic firms and the employment for permanent workers is statistically significant until two years after the export participation. Interestingly, the export participation of domestic firms with a higher R&D intensity is more likely to increase jobs for temporary workers relative to permanent workers. It means that uncertainty about commercialization of R&D (e.g., creation of added value through commercialization) may increase the demand of temporary workers. And also, it is highly likely that short-term employment benefits will return to temporary workers due to the nature of R&D investments to secure long-term competitiveness.
  In this study, the overall effect of exports on employment has been analyzed using both industry- and firm-level data. Focusing on the efficiency of resource allocation among industries, the industry-level analysis has emphasized the role of industry-level capital intensity in determining relationship between exports and employment. Based on the results of industry-level analysis, we have emphasized the importance of i) participation and expansion of exports by SMEs and ii) strengthening linkages between manufacturing and service industries. Based on the results of the employment effects of exports using firm-level data, we have emphasized the importance of the government's medium- to long-term corporate policies (i.e., fair trade, R&D investment, large and small business cooperation policies, market protection for SMEs, etc.). In addition, it has emphasized that it is important to make a corporate environment that is favorable to SMEs, so that SMEs can be utilized as a driving force of sustainable growth through enhancement of competitiveness. 

  As global liberalization has progressed over the past few decades, the income gap between countries has declined gradually but income distribution within the country has continued to deteriorate. As income inequality became a social issue, external causes such as free trade, immigration, and international capital movements began to attract attention. Although Korea is a significant beneficiary country of free trade, public support for free trade has weakened.
  The official statistics on income inequality in Korea are known as underestimated, the actual level of Korea is lower than that of the United States, but somewhat higher than those of Europe and Japan. Although their differences in the level of income inequality, government survey data show the same trends; inequality has risen since the mid 1990s, but it has been declining or stagnating since the beginning of 2010.
  The reasons for the changes in the income inequality in Korea include ① changes in the structure of the exporting industry, ② slowing of employment, ③ skill-biased technological change, ③ slowing of personal income growth, ④ proliferation of performance-based pay system, ⑤ population aging and changes in household composition.
  The labor income share fell after the financial crisis in 1997, and then continued to fluctuate. In 2016, it reached 72.2% which is the level before the global financial crisis of 2008. As a result of the decomposition of Gini coefficient by income source, distribution structure of Korea is turned out to be determined mainly by labor income. Income inequality of service workers and unskilled labors increased, and Gini coefficient increased in most industries. The estimates of three parameters (alpha, beta, gamma) representing the income distribution in Korea show that inequality in the low income group has gotten worse rapidly and polarization has progressed
  According to the country level panel analysis, trade liberalization improves income distribution, while investment liberalization and technological progress deteriorate inequality. Capital liberalization increases high income share, but its effect on overall income inequality is not significant.
  Estimation results of industry level analysis are as follows. Export in manufacturing increases labor income share, but foreign investment increases capital return. Also exports have positive effects on the low-income group. The more the competitiveness of a sector improved, the more positive effect was on the low-income group. Foreign investment in the manufacturing industry has negative effects on both the high-income and low-income groups, while FDI in the service industry increase income of the low-income group. The increase in R&D investment was negative for the high-income earners and positive for the low-income earners. 

  Importance of energy becomes more pronounced as an economy progresses. Energy is essential for firms with running capital and for households with durable consumption. Oil prices plummeted around 2014; resource-rich countries, such as Russia and Brazil, faced challenges amidst gradual recovery from the global financial crisis; traditional oil exporting countries such as Saudi Arabia and Venezuela which have expanded their welfare program with revenues ended up with deteriorating fiscal soundness. From the both side of supply and demand the impact of energy on an economy is immense, and therefore, it is important for a policy maker to understand turmoils in related markets and to make timely and relevant responses. A series of empirical researches including Kilian(2009) point out that oil price shocks are originated from multiple sources and that macroeconomic impact can vary according to the source of a shock. As a consequence, decomposition of oil price shock and relevant policy response based on correctly identified source are sought after.
  Korea, often called an energy island, entirely depends its energy supply to external sectors, and a foremost goal of energy policy has been to secure stable energy suppliers. Another characteristic of Korea related to energy sector is to have a large portion of refinery and petrochemical industry. In this regard, impacts through these industries should also be counted when analyzing macroeconomic effects, largely on exports and imports, of oil price shocks.
  Still another important changes in international energy market is focused on renewable energy. Fossil fuels, such as coals and oil, are considered responsible for greenhouse gases whose control has been materialized as the Paris agreement in 2015. The nuclear power is once considered a clean and cheap alternative, but the stability and safety is questioned after the 2011 Tohoku earthquake in Japan. More attention is now paid on the efficient use of renewable energy, and technological advances in related sectors take places. Policy considerations are requested to offer proper incentives for renewable energy suppliers.
  This research aims to grasp the changes in international energy market and their impact on the Korean economy, especially on external secters inclucing exports and imports. Chapter 2 reviews international and domestic oil markets and renewable energy markets. It investigates factors that affect demand and supply of energy, and also introduces policy efforts of major economies for enhancing renewable energy supply.
  Chapter 3 applies Kilian(2009)’s approach to the Korean economy focusing on the external sector. The source of oil shocks are decomposed into three factors: oil supply shock, aggregate demand shock, and oil-specific demand shock. The result shows a similar pattern can be found with the Korean time-series data.
  In Chapter 4 an open economy DSGE model is developed, which extends Huynh(2016) with an augmentation with upstream and downstream sector in energy industry. While the upstream sector like crude oil extraction does not reconcile with the current situation of Korean industrial structure, the downstream sector including refinery and petrochemial industry plays important role in the Korean economy, specially exports and imports. The model replicate the empirical results in Chapter 3 and it can be further used for policy simulations.
  Chapter 5 introduces the renewable portfolio system (RPS) of Korea, which requires a minimum proportion of electricity generation for a large operator to be delivered from renewable sources. The requirement can be fulfilled by the renewable energy certificates (RECs) purchasable from small and independent renewable energy providers. Expected cost under a current policy goal is calculated. However, a macroeconomic impact under the DSGE model is not presented due to the limitation of the model and further study is needed.
  Chapter 6 presents policy implications and concludes. 

Foreword

1.Perspectives and Coping Mechanism of the Kenyan Economy from the Changes in Political and Economic Environment of the USA and UK
∙Christopher Hugh Onyango (Policy Analyst, Kenya Institute for Public Policy Research and Analysis)

2. How India Faces Trade Protections? An Analysis of Trade Barriers
∙Prabir De (Professor, Research and Information System for Developing Countries)∙Mohammad Masudur Rahman (Researcher, Waikato University)

3. Mexico’s Proposal to Rising Protectionism: Assessing the Scope of an Industrial Policy in Facilitating Trade Diversification
∙Gerardo Castillo Ramos (Economics Research Manager, Centro de Estudios Económicos del Sector Privado)

4. Trump, Protectionism, and Middle East Trade Policy
∙Joseph A. Kéchichian (Senior Fellow, King Faisal Center for Research and Islamic Studies)

5. The Era of New Protectionism and China’s Strategies 
∙Tu Xinquan (Professor, University of International Business and Economics)
∙Yingxin Du (Assistant Professor, University of International Business and Economics)

6. Russia Amid the Battle of Sanctions: Implications for Russia-ROK Cooperation
∙Evgeny Kanaev (Professor, School of International Affairs, Faculty of World Economy and International Affairs, National Research University Higher School of Economics)

7. The Rise of New Protectionism: How Will It Impact Vietnam and How Should the Country Respond?
∙Le Quoc Phuong (Deputy Director-General (former), Vietnam Industry and Trade Information Center) 

  ‘The Studies in Comprehensive Regional Strategies Collected Papers (International Edition)’ contains seven comprehensive and in-depth research papers for better understanding about emerging economies such as Africa, India-South Asia, Latin America, Middle East, Northeast Asia, Russia-Eurasia, and South East Asia. 

  In recent years, there has been two contesting paradigms, ‘wage-led or income-led growth’ and ‘profit-led growth’ proposed in academic circles in Korea. However, there has been also a search for alternative distribution-growth model because the Southern European countries such as Portugal, Italy, Greece and Spain and some Latin American countries such as Brazil and Venezuela have failed from income-led growth policies adopted during 1990s and early 2000s under their socialist democratic regimes. The so-called ‘income-led growth policy’ adopted by the new Korean government established in May 2017 became a coined word by ILO (2010) in the literature of distribution-growth. It tries to trace the origin of worldwide stagnation after the global financial crisis of 2007 and finds its cause in the inequality of income from wage differential. It argues that since the rate of growth in wages is lower than the growth rate of GDP and therefore, domestic demand is lagging behind recovery. It proposes for increasing wages so that a virtuous circle of household income increase, consumption increase and domestic demand increase could be established. But there has been a criticism on income-led growth policy since it does not fit to the reality of the Korean economy as an export-oriented small open economy. They argue that the stagnation in the Korean economy is not due to low wage level but is due to stagnant investment and therefore, investment-led growth policy rather than income-led growth policy is more desirable to be adopted. They also argue that it is desirable to increase growth rate through investment and innovation and therefore, the government policy needs to be reoriented from income-enhancing policy to economic revitalization through structural reforms and promotion of corporate investment. It seems that it is difficult to link income-led growth policy to a significant consumption increase because of the high level of household debt and their precautionary consumption restraint for uncertain future.
  Theoretical background of wage-led or income-led growth theories can be traced back to Bhaduri and Marglin (1990), UNCTAD (2010), Stockhammer (2011), Storm and Naatepad (2011), Stockhammer and Onaran (2012) andLavoie and Stockhammer (2012). The empirical results on wage-led or income-led growth policy are mixed and inconclusive. Onaran and Galanis (2012) reports that an increase in wage income share will increase aggregate demand in US, Euro area, Japan and Korea but will decrease aggregate demand in China, India, Australia, South Africa, Argentina and Mexico which is in contradiction to the post-Kaleckian theoretical proposition that resource-rich large countries will benefit more from a wage-led growth policy. Onaran and Stockhammer (2005) has built a post-Keynesian open economy model of distribution, accumulation and employment and estimated the effect of lowering the wage share in a structural vector autoregression (SVAR) framework. They found that decreasing the wage share does not stimulate accumulation, growth and employment in both Turkey and South Korea. They have noted that the relation between wage share, investment, growth, and employment is similar in both Turkey and South Korea; however the former experienced low and the latter high growth rates due to different export-oriented growth strategies with a conclusion that the explanation for this difference is found in the field of institutions, power structure, and state policies.
  There are a few empirical studies using Korea-specific dataset. Hong (2014a) has estimated a demand-led growth model modifying Bhaduri and Marglin (1990) model. He finds that the increase in labor income share had stimulated consumption and investment in the period (1981- 1997) before the financial crisis in 1998 in Korea but since the propensity to consume out of labor income was weak, the wage-led effect on domestic aggregate demand was not strong. However, he finds that after the financial crisis the propensity to consume became stronger than before and the subsequent reduction in labor income share due to the financial crisis had weakened consumption considerably. During the post-crisis period, while the increase in capital income share did not contribute to the increase in investment and net exports, the wage-led effect on aggregate demand has strengthened. In another related paper, Hong (2014b) estimates a demand-led growth model combining demand system with productivity system following Storm and Naastepad (2011). He finds that during the post-crisis period (1999-2012) the increase in real income by 1 percentage point will increase real growth rate of GDP by 0.68-1.09 percentage point and labor productivity by 0.45-0.50 percentage point. Based on these estimates, he argues that treating labor income as cost elements only is one-sided analysis and that an income-led policy by increasing labor income will stimulate aggregate demand and productivity and will contribute to establish a virtuous circle of distribution and growth.
  On the other hand, Kim (2013) has found that aggregate demand system in Korea is profit-led structure in the sense that the increase in capital income share stimulates aggregate demand. Pyo, Chun and Rhee (2017) have estimated the growth rate of economy-wide nominal wage rate (3.69%), real wage rate (1.66%) and per-capita labor productivity (1.58%) respectively during the post global financial crisis period of 2009-2016. During the same period, the corresponding growth rates in manufacturing were nominal wage rate (4.34%), real wage rate (2.29%) and per-capita labor productivity (1.58%). It implies that the Korean economy during last 8 years after the global financial crisis in 2008 has experienced both nominal and real wage inflation surpassing the growth rate of per-capita labor productivity. During the same period (2009-2016), the real GDP and private consumption expenditure increased at the rate of 3.1% and 2.2% respectively. From this perspective, we can argue that the Korean economy has already experienced an income-led growth during the period after the global financial crisis in 2008 but its policy impact on private consumption expenditure was very small and insignificant.
  The investment-led growth policy proposed as an alternative for income-led growth policy has the following theoretical implications. If an economy’s demand–led growth is supported by a debt-financed consumption-led system, it may confront difficulty by the reduction in the economy’s potential growth rate as we had experienced in the global financial crisis in 2008. Such a consumption-based demand-led growth can provoke inflation and invite worsening balance of payments. On the contrary, if the economy’s demand-led growth is either investment-led or export-led, then the economy has a sufficient momentum to raise natural rate of economic growth. In other words, since the investment was productive, it reduces the supply bottlenecks. And if export earnings can finance imports necessary for faster economic growth, imports can be used for a more productive use than domestic resources.
  We have also estimated ex-post rates of return by industries in the Korean economy. During the period of 1981- 1990, the economy- wide average ex-post rate of return was very high (41%) as Harberger (1988) and Pyo and Nam (1999) termed it as ‘outlier’. But the rate of return started to fall to the level of 14.8% during 1991-2000, 6.6% during 2001-2010 and 2.5% during 2011-2014. The average ex-post rate of return in manufacturing is estimated to be only 1.69% even lower than the average ex-post rate of return in economy-wide level, which has affected sluggish investment in manufacturing during the period. We have also estimated an accelerator investment model with double-Koyck type expectation hypothesis to find that when we used both real investment and real output as variables, the estimated coefficient of ex-post rate of return was negative (-) and statistically significant. In case of Korea, the continued downfall of ex-post rate of return must have been a cause of investment stagnation during the period after the financial crisis in 1997.
  The case study on the country-specific investment-led policies can be summarized as follows. Dolinskaya (2002) provides us with the case of Russia in transition period (1991-1997) in which a reverse investment-led growth rather than investment-led growth was made. During the transition period, even the minimum investment for maintenance and replacement without mentioning new investments were not adequately made. As consequence, he estimates the growth accounting result of the transition period: Real GDP growth rate (-8.0%), labor input growth (-2.0%), Capital input growth (-1.7%) and TFP growth rate (-4.3%). According to Bosworth and Collins (2008), the growth rates of per capita real GDP during 1978-2004 are estimated as China (7.3%), India (3.3%) and East Asia except China and India (3.7% during 1980-2003). The growth rates of physical capital were China (3.2%), India (1.3%) and East Asia except China and India (0.9%). This result indicates for example, in case of China, the investment-led policy centered on physical capital input has promoted total factor productivity and as a result, it contributed significantly to enhancing output-income. Robertson (2010) argues that the total factor productivity growth rate in India (1.6%) is less than half the rate in China (3.6%) and therefore, unless India’s investment-led growth is lined to productivity growth, it may experience the falling rate of return from its excessive over-investment. India’s Investment/GDP ratio reached 35% level during 2000-2010. In Latin America, ‘economic populism’ was the core of its Keynesian policies. According to Isakkson, Ng and Robyn (2005), Brazil had fulfilled reforms on regulation in the public sector and had induced private capital in social infrastructure sectors. However, the existence of large unofficial labor market had inhibited private investment and productivity growth. It provides us with a lesson that any investment-led policy cannot be successful in maintaining a sustainable growth through productivity improvement unless its labor market operates normally. Argentina’s aggressive privatization policy in the 1990s had improves profit rate and operational efficiency in the privatized corporate sectors. But it could not be followed by and backed-up by institutional reforms and therefore had failed ultimately in late 1990s. OECD (2016) has analyzed the labor reform in Spain (2013-2015), Estonia (2009) and Slovania (2013) and recommended that labor reforms are key factors for the investment-led growth to be successful. OECD (2016) recommends a flexible labor market policy with reduced lay-off costs and lowering the income differential between full-time workers and party-time workers and between large enterprises and small and medium enterprises. OECD (2016) also recommends a voluntary and flexible labor relations system based on individual corporate practices rather than industry-wide centralized labor relations system.
  We have noted in this report that the income inequality status of Korea at the present time is in the mid-level among OECD countries and there is no significant sign of declining labor income. As pointed out in Pyo (2016b), the growth rate of real income by the middle class has been relatively falling behind that by the lower income class. The wag-led policy advocated by post-Keynesians and ILO (2011)) has been replaced by income-led policy encompassing non-wage income. However, the income-led policy has the following shortcomings and limitations. First, the economy with higher weight of external sector may face profit squeeze, increase in production costs and investment reduction rather than positive effects of wage and income increase. Second, the income-led policy can have a temporary expansionary effect only when the economy is in a deep depression or long-term recession. Third, as pointed out by Bowles and Boyer (1988), an income-led policy can be applied to advanced economies as a temporary recovery policy when they are equipped with social institutional infrastructure to manage wage restraints accompanied by labor reforms. Fourth, if a certain demand-led system is a kind of debt-financed consumption-led system, it can reduce future potential growth rate of the economy as many nations experienced in the global financial crisis. Such a debt-financed consumption-led system can invite inflation and worsening balance of payments as pointed out by Dray and Thirwall (2011). On the other hand, if the demand-led system is investment-led or export-led type, the economy may have enough room for lifting up natural growth rate. In other words, their investment will be productive so that it can reduce supply bottlenecks. If export earnings can finance imports necessary for faster economic growth, then imports can be used more productively than domestic resources. It will be desirable for government to switch from populist consumption-led system to investment-led and export-led demand system.
  Based on both theoretical and empirical analysis with country- specific case studies, we recommend the following policy prescriptions.
  (1)It is desirable for government to switch its policy from income-led growth policy to investment –led policy. The critical feature of income-led policy lies in its populist nature of zero-sum game-type income redistribution policy rather than stimulating income creation. The minimum wage policy, the arbitrary and forced labor policy to switch jobs from part-time to full-time, artificial job creation and increasing labor regulations can create irrecoverable high-cost production system due to the downward wage rigidity.
  (2)The switch from employment-biased policy to productivity- based policy is needed. The sectors and companies with higher productivity should be encouraged to create more jobs and on the contrary, the sectors and companies with lower productivity need to reduce jobs through labor reform. In this regard, the government needs to focus on corporate restructuring in non-competitive declining industries.
  (3)The movement for ‘doubling-productivity campaign’ by both public and private enterprises can be promoted. The means of doubling productivity are intra-industry restructuring and inter-industry restructuring. The intra-industry restructuring can be supported by both financial support and tax incentives for promoting M&A between lower-productivity enterprises and higher- productivity enterprises. The inter-industry restructuring can also be supported by both financial support and tax incentives to promote mobility among land, capital and labor.
  (4)It is necessary to promote innovation and human capital enhancement by the mainstream enterprises and companies. In order to prepare for the fourth industrial revolution, it is necessary to avoid too much regulatory educational policies and regulatory labor policies.
  (5)As pointed out by Piketty (2014), ‘the only exit’ for an industrialized capitalist economy, which faces ageing population and low fertility rate to survive and maintain a sustainable growth path is to increase productivity. The world-wide market trend is moving to the direction of mainstream economic theories such as new growth theory and endogenous growth theory. It is moving in the direction of “too-big-to-fail” phenomenon in which super-large nations such as Uniteds States, China, India and Japan play dominant roles and exert externality effects from cumulated social capital and R&D. Since the Korean economy is weaker in terms of cumulated physical, human and social capital, it needs to complement these weak points by strengthening external sectors. Income-led growth policies can repeat the failed inward-looking policies adopted once by India and Pakistan. Korea needs to re-orient its growth strategy toward outward-looking investment-led growth policy.