Based on an analysis of the International Input-Output Table Japan-Korea (1985, 1990) and the Asian International Input-Output Table (1995), this paper focuses on changes in the industrial interdependence between Korea and Japan after the Plaza Accord, an agreement which triggered a drastic appreciation of the yen. Considering the industrial structures of the two countries and the structure of the trade between them, special attention was paid to the manufacturing sectors, which were analyzed on the basis of a more detailed industrial classification than the other sectors. In particular, we measured the international technological specialization (ITS) index between Korea and Japan, which provided a foundation for studying the structure of Koreas heavy dependence on Japan-made intermediate inputs. The ITS index shows the amount of intermediate goods certain industries in two countries import from each other, and serves as a good indicator of a country's dependency on imports for intermediate inputs. (The rest is omitted.)

Executive Summary

I. Introduction

II. Statistical Background for Empirical Analysis

III. Changes in Industrial Linkage between Japan and Korea
1. Analytical Framework
2. Results of Empirical Analysis

IV. Changes and Comparison of International Technological Specialization between Japan and Korea
1. Analytical Framework
2. Results of Empirical Analysis

V. Concluding Remarks

References

Appendix