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  • ODA 시행기관의 성과관리체계 개선방안 연구
    Study on Results-Based Management System in Korea’s Aid Agencies

       Since Korea’s accession to the OECD Development Assistance Committee in 2010, there has been a continuous rise in Korea’s aid budget as well as the number of government ministries and public agencies engaging in the..

    Yul Kwon et al. Date 2021.08.31

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       Since Korea’s accession to the OECD Development Assistance Committee in 2010, there has been a continuous rise in Korea’s aid budget as well as the number of government ministries and public agencies engaging in the aid industry. The proliferation of new actors has led to growing concerns on the organizational capacity to ensure aid effectiveness of new aid-spending ministries and agencies. Aside from the main aid agencies such as the Korea International Cooperation Agency (KOICA) and the Economic Development and Cooperation Fund (EDCF) under the Export-Import Bank of Korea, the number of government ministries and public agencies (hereafter referred to as non-aid agencies) that spend aid budget is up to forty-one as of the financial year 2021. In terms of budget composition, the non-aid agencies account for approximately half of Korea’s grant aid budget.
       In this context, this paper reviews aid management schemes at Korea’s aid agencies as well as non-aid agencies with special attention on their organizational capacity to ensure aid effectiveness and results-based management. Chapter two starts by reviewing the aid management schemes of Korea’s aid agencies and non-aid agencies in terms of their aid strategy and programs, key channels and modalities, budget allocation and result-management system. In addition, the paper moves on to analyze the aid portfolio and governance mechanism of the fourteen top aid-spending agencies, examining whether and to what extent there exists a strategic coordination system among multiple executing agencies to ensure internal coherence of their projects and programs. Based on a case-study approach, chapter three explores the cases of three agencies that have different cooperation schemes for results management and evaluation. The first model is the case of the main grant aid agency, namely KOICA, which has an independent evaluation unit within the agency. The second model is the case of the Ministry of Health and Welfare and its executing agency, the Korea Foundation for International Healthcare (KOFIH), which incorporates an evaluation function within the agency. The organizational structure for evaluation at the KOFIH is somehow similar to that of the KOICA, albeit with much smaller budget. The third model is the case of the Ministry of Agriculture, Food and Rural Affairs and its main executing agency, the Korea Rural Community Corporation, which delegates the evaluation function to the state-led think tank, the Korea Rural Economic Institute. Having evaluation functions within or outside the agency, the experience of these three agencies provides valuable lessons for other agencies with relatively limited budget, human resources and expertise. It was found that in order to strengthen evidence-based policy and implementation and ensure aid effectiveness, Korea’s aid agencies need to invest more on building evaluation expertise, addressing resource constraints and make more efforts to use and learn from the evaluation results and recommendations. 
       Based on the analysis, the paper concludes with suggestions for future policy direction. Amid the growing demand for evidence-based decision-making and value for money, it is recommended that the Korean government introduce periodical assessment of results management systems at Korea’s aid agencies and strengthen strategic evaluation and learning systems for increasingly diverse actors in aid industries. The paper also suggests that the newly established Office for International Development Cooperation under the Office for Government Policy Coordination of Korea exercise enhanced leadership to provide policy directions and guidelines in the realm of results-based management and evaluation systems for Korea’s aid and non-aid agencies. 

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  • FTA가 중소기업의 고용과 혁신에 미치는 영향
    The Effects of Free Trade Agreements on SMEs’ Employment and Innovation

    Beginning with the Korea-Chile Free Trade Agreement (FTA) in 2004, Korea has continued to actively implement FTA policies, and as of June 2020 a total of 16 FTAs ​​with 56 countries are in effect. As a result, Korea's trade volume..

    Kyong Hyun Koo et al. Date 2021.09.02

    Labor market, Trade policy

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    Beginning with the Korea-Chile Free Trade Agreement (FTA) in 2004, Korea has continued to actively implement FTA policies, and as of June 2020 a total of 16 FTAs ​​with 56 countries are in effect. As a result, Korea's trade volume has grown rapidly since the 2000s, providing an important driving force for Korea's economic growth.
      A number of studies have reviewed the positive impacts of the FTA policy on the overall economic growth of Korea from various aspects. However, there have been few attempts to explore whether the positive results of FTAs have been shared evenly between large and small/ medium enterprises, or if most of the benefits have been enjoyed mainly by large enterprises. Addressing this research gap, this study examines the effects of Korea's FTA policies on employment and innovation activities of SMEs and analyzes how each effect varies depending on firm characteristics to draw policy implications.
      According to the empirical results, the employment and real wages of SMEs significantly increased mainly in industries where the effect of export expansion due to FTAs was higher, with innovation activities also taking place more actively in such industries. On the other hand, although the SMEs in industries with high import competition due to FTAs showed a relatively low increase in the real wage, no negative effect was found on the employment or innovation activities of SMEs. Taken together, Korea's FTA policies seem to have played a positive role in boosting overall employment and innovation of SMEs in the manufacturing sector.
      However, when re-identifying the FTA effects by firm size of SMEs, most of the positive effects of FTAs ​​were mainly centered on medium- sized enterprises, and relatively small enterprises tended to be alienated from such positive effects or conversely exposed to the negative effects of FTAs. For example, the effect of reducing the real wage growth rate due to FTA-induced import competition effect mainly occurred in small enterprises, and the effect of FTAs toward increasing the innovation activities of small enterprises was not found. On the other hand, medium-sized firms led the increase in employment and innovation activities of SMEs due to the FTA export effect, and although they experienced a decrease in employment due to the FTA import competition effect, there was no significant decrease in real wages. This suggests that unlike small-sized firms, medium-sized ones have leveraged the import competition pressure from FTAs as an opportunity for efficient resource allocation and productivity improvement through restructuring.
      Based on the results of the empirical analysis above, we discuss some policy implications for improving FTAs’ benefits for SMEs’ employment and innovation.
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  • 중국의 통상환경 변화와 국가별 상품 간 수출 대체가능성 연구
    Multidimensional Substitutability Measurement and Analysis: with an Application to Trade between China and South Korea

       Recent changes in the trade environment surrounding China are developing dynamically. These changes are expected to directly or indirectly affect the Korea-China trade structure. Therefore, in this study, focusing on ..

    Wonho Yeon et al. Date 2021.05.28

    Economic relations, Trade structure China

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       Recent changes in the trade environment surrounding China are developing dynamically. These changes are expected to directly or indirectly affect the Korea-China trade structure. Therefore, in this study, focusing on the possibility that Korea’s exports to China could be replaced by Chinese or foreign products in the future, we establish a new quantitative analysis methodology to analyze the level of substitutability of Korean exports.
       One of the most important external changes in China’s trade environment is the U.S.-China trade conflict. In particular, in countries such as Korea that export final products to the U.S. while forming a division of labor with China in the global value chain (GVC), the conflict between the U.S. and China is acting as a greater destabilizing factor. In terms of the substitutability of Korean exports to China, the U.S.-China conflict can have an effect through various channels, and one of the important events is the U.S.-China Phase 1 trade agreement.
       For internal changes, it is important to study China’s industrial upgrading strategy. China, which has been called the “world’s factory,” has been pursuing a strategy to improve the localization rate and upgrade its industrial structure through technological development and innovation. Accordingly, China has been adjusting its role and position within the GVC, in which China used to be in charge of the simple processing trade. As the U.S.-China trade dispute escalated since 2018, the U.S. containment policies have intensified as well, particularly against China’s advanced industry and technology sector. As a reaction to this, China has dealt with its industrial policies not only in the context of economic growth but also in national security. The strategy to indigenize core technologies and parts has been strengthened and pursued under the goal of establishing a fully independent supply chain within the nation. Due to China’s industrial advancement and import substitution strategy, concerns are growing about the replacement of Korean-made exports to China by Chinese products.
       In Chapter 2, the internal and external factors of the recent development of China’s trade environment are briefed. As an external factor, the US-China Phase 1 trade agreement was reviewed, and as an internal factor, the import substitution strategy of China was examined. Chapter 2 provides the background of the case analysis in Chapter 4, while emphasizing the necessity for developing the new multidimensional methodology that was newly modeled in Chapter 3.
       In Chapter 3, we explained the multidimensional import substitution index model, which is the core contribution of this study. First, we examined the Alkire-Foster (AF) model that provides the basic structure for the Yang-Yeon (YY) model that derives the multidimensional substitutability index (MSI). Second, we explained our model, the Yang-Yeon (YY) model, which is a newly built methodology based on the AF model to analyze the probability of substitution between the imported products. 
       In Chapter 4, applying the YY model derived in Chapter 3, we conducted case studies to see how Korea’s exports to China are actually affected by related events and policies. First, we analyzed the effect of the U.S.-China Phase 1 trade agreement on Korea’s exports to China. Second, we investigated the influence of China's import substitution policies on Korea’s exports to China. 
       In the last chapter, we reemphasized the necessity of the YY model to fully understand the substitutability between the exporting goods and the trade partner’s home-produced goods or the third party’s exporting goods. Also summarizing the analysis results of the case studies based on the YY model, we presented the policy implications and suggestions. The YY model predicted that the US-China Phase 1 trade agreement would not have a significant impact on Korea’s exports to China. This suggests that it is necessary to prepare more objective and comprehensive responses using quantitative methods such as the Multidimensional Substitutability Index (MSI) rather than engaging in qualitative conjecture or groundless concerns. However, the YY model predicted that China’s industrial upgrading policy would act as a major threat to Korea’s exports to China in the long term. In particular, the possibility of Chinese goods replacing Korean products is high in general goods, suggesting that Korean-made products with low technological levels will eventually be replaced by the Chinese as Chinese manufacturing technologies advance. What is more worrisome is that Chinese industries and products positioned as strategic emerging industries or targets of scientific and technological innovation, such as products related to renewable energy, batteries, semiconductors, and electric vehicles, are highly expected to replace Korean products not only in the mid- to long-term but also in the short term. 
       Korea’s best response to China’s industrial upgrading strategy will be to maintain its comparative advantages over China. However, the realities in Korea make it difficult to maintain competitiveness in all industries and technologies, meaning it will be necessary to choose and focus on areas that will develop as major industries in the era of the 4th industrial revolution. Therefore, we hope the newly constructed YY model that provides the Multidimensional Substitution Index (MSI) will help policymakers to identify areas where competition with China is likely to intensify, and to determine the target and priority of policy support.
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  • 한ㆍ중ㆍ일 소재ㆍ부품ㆍ장비 산업의 GVC 연계성 연구
    A study on GVC linkage of materials, parts, and equipment industries in China, Japan and Korea

       China, Japan and Korea (CJK) have been competing and cooperating in many fields in the material, parts and equipment industries due to their geographical proximity and similarity in industrial structure. However, non-..

    Hyung-Gon Jeong et al. Date 2021.06.30

    Trade structure, Industrial policy China Japan

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       China, Japan and Korea (CJK) have been competing and cooperating in many fields in the material, parts and equipment industries due to their geographical proximity and similarity in industrial structure. However, non-economic factors such as COVID-19 and sanctions against Korea by Japan and China pose obstacles to economic cooperation among CJK. Therefore, this study derives policy implications for the efficient management of global value chains (GVCs) in the materials, parts and equipment industries by comparing the supply chain structure of Korea’s materials, parts and equipment industries with Japan and China. The main contents of this study consist of four parts. 

       First, this study analyzes changes in the trade structure and mutual connections between Korea, China and Japan in the materials, parts and equipment industries, from 2000 to 2018.
       Over the past 20 years, Korea’s materials, parts and equipment industries have grown significantly. During this period, the top industries for Korean exports/imports in the materials, parts and equipment  sectors have been electronic components (1st), chemicals and chemical products (2nd), and primary metal products (3rd) ‒ areas of high competition with Japan and China in the global market. 
       The biggest change in Korea’s materials, parts and equipment industries came in 2018, when the import and export rankings of textile products and non-metallic mineral products sharply declined, and the transportation machinery parts and semiconductor display equipment industries rose in their ranking. These changes reflect the fall in production of general-purpose technology industries in Korea, accompanied by an increase in the proportion of industries requiring advanced technology and specialization in related industries. General purpose technology products have changed to a trend of importing from China or third countries.
       Trade in China’s materials, parts and equipment industries also grew rapidly during the same period, and imports and exports of general-purpose technology products increased significantly. The top trade items of China’s materials, parts and equipment industries are electronic products, electrical equipment parts, chemicals and chemical products. China shows very high competitiveness in textile products, but when compared to other industries in terms of export and import data for 2018, these were found to have declined significantly in terms of size and competitiveness against 2001 levels.
       Japan’s materials, parts and equipment industries are still highly competitive. However, the share of industries related to general-purpose technology has been reduced, and only industries specializing in advanced technology fields remain visibly competitive. The remarkable changes in the Japanese materials, parts and equipment industries over the past 20 years have led to a decline in the stature of the textile industry, and the status of the semiconductor display equipment industry has risen far higher than in the past.
       Meanwhile, the characteristics of imports and exports between Korea and China, Korea and Japan, and Japan and China were identified by classifying the materials, parts, and equipment industries into 231 fields. Trade between Korea and China in the materials, parts and equipment industries is concentrated in 20 items, each accounting for more than 1% of the import and export items. As for Japan’s exports in materials, parts and equipment industries to China, there was no detectable phenomenon of specific items dominating exports. The characteristics of Japanese imports from China are similar to those of Korea, but differed in that no items account for more than 1% of imports from China in the equipment industries.

       Second, the study examined the competitiveness of materials, parts and equipment industries of CJK by comparing the share of imports and exports of materials, parts, and equipment industries, and calculating Revealed Symmetric Comparative Advantage Index (RSCA), Export Similarity Index (ESI), and Trade Specialization Index (TSI) for each country.
       When looking at the share of imports and exports of the materials, parts and equipment industries by CJK in the global market, the rise of China (3.2% in 2001 → 14.4% in 2018) is prominent. On the other hand, Japan’s share of exports declined, while Korea’s increased. A field in which Japan occupies an overwhelming position in the export market of the global materials, parts and equipment industries is the semiconductor display equipment industry. The Korean semiconductor display equipment industry relies on overseas sources for over 90% of its procurement, indicating the need for caution of dependence on Japan in the field.
       When analyzing RSCA, Japan had the highest competitiveness, but the gap with Korea has been narrowing since 2016 after peaking in 2011. China continues to show a large gap with Korea and Japan.
    Korea-China, Korea-Japan, and Japan-China ESI has steadily increased over the past 20 years. During the same period, ESI between Korea and China (56.4 → 66.9) increased the most. ESI between Korea and Japan (57.5 → 61.3) and ESI between Japan and China (55.0 → 60.2) also increased.
       When examining TSI data, Korea’s competitiveness in textile products, rubber and plastic products, and semiconductor display equipment has weakened compared to the beginning of 2000. All other 13 fields show improved competitiveness. China has improved its competitiveness in all 16 fields. On the other hand, Japan’s competitiveness in the primary metal products, semiconductor display equipment, and measurement equipment industries has improved, while its competitiveness in the other 13 fields has weakened.

      Third, the study analyzed the changes and characteristics of GVCs in the materials, parts and equipment industries of CJK using the World Input-Output Table.
       Taking into account the structural characteristics of production and trade taking place from 2010 to 2018 in the materials, parts and equipment industries of China, Japan and Korea, the production-induced effects (feedback effects, spillover effects, domestic induced effects, etc.) generated under global value chains in the three nations were calculated. It was also analyzed how each country’s production and trade induce other countries’ production and trade. The analysis results are as follows.

       1) The backward linkage effect of materials, parts and equipment industries in CJK was significantly different in 2018 compared to the year 2000, leading to a significant change in GVC from the perspective of production technology.
       2) It was observed that the level of production-induced effects to partner countries in the materials, parts and equipment industries of CJK has also changed significantly.
       3) The globalization of the economy among CJK is having a significant impact on the GVCs change in the materials, parts and equipment industries. In addition, Korea’s import-dependent GVCs linkage with China and Japan is becoming relatively deeper than that of China and Japan.
       4) All three nations show deeper GVCs linkage of production technology, focusing on key export products such as electrical equipment and electronic parts, primary metals and metal processing products, textile products, general machinery parts and equipment, and transportation machinery parts. Through this, it was confirmed that a horizontal division of labor and competition systems are being established not only in the global market but in partner markets as well.
       5) Measuring the inducement structure of production and trade in the materials, parts and equipment industries of CJK shows that the spillover effects of all three countries increased in each other, indicating the formation of interdependent GVC linkage.
       6) The direction of CJK spillover effect changed from “China → Japan, Japan → China, Korea → Japan” in 2000 to “China → Korea, Japan → China, Korea → China” in 2000, signifying a rise in China’s influence.
       7) When examining the results of direct and indirect decomposition of the spillover effects among the three countries, indirect spillover effects were found to be quite small.
       8) Overall, Japan’s materials, parts and equipment industries are highly concentrated in domestic production and show a relatively low level of production-induced effects for other countries.

       Fourth, GVC linkage was verified through a survey of materials, parts and equipment companies. The survey was conducted on 3,260 materials, parts and equipment companies during January 2021, and 502 valid samples were obtained.
       The importance of China and Japan was once again confirmed as a result of a survey on the need to reorganize the supply chain of the materials, parts and equipment industries in Japan and China caused by COVID-19 and diplomatic issues. The results indicate it will be difficult for a new form of GVCs to replace Japan and China for the time being.
       The importance of Japan and China as trading partners is still high, and there is low possibility of changing sources of procurement from Japan or China. In the end, despite many restrictions due to non-economic issues, Japan and China remain important partners for Korean’s materials, parts and equipment companies. Therefore, the government needs to take this situation into account and actively engage in diplomatic efforts for a win-win approach with China and Japan.
       However, CJK represent one of the most sensitive regions to non-economic shocks such as natural disasters and disputes between the United States and China. Therefore, it is necessary to shift from the existing cost- and efficiency-based global value chains (GVC) management to a rational GVC management based on supply chain stabilization.
       As the trend of strategic weaponization is expected to continue gaining strength in the core materials, parts and equipment industries, it is necessary to move away from monopolistic supply chains and pursue a strategy for multi-polarization of the supply chain, and reasonable decoupling from countries where potential risks exist.
       In addition, domestic self-reliance should be promoted in fields with high foreign dependence, such as the semiconductor display equipment industry. Also, most companies in the materials, parts and equipment industries are small and medium-sized enterprises (SMEs) greatly lacking in terms of  technology development and market dominance, meaning that measures are urgently needed to address this concern.

       Finally, considering the pace of development in China’s materials, parts and equipment industries over the past 20 years, the gap in competitiveness of the materials, parts and equipment industries in CJK will be greatly reduced, and the GVCs of China-centered materials, parts and equipment industries are expected to show significant advances. It will be necessary to prepare countermeasures by the government and companies accordingly.
       The materials, parts and equipment industries in Korea should transition from general-purpose technology to more specialized and advanced technology. Towards this, the policy proposals in this report, based on an analysis of competitiveness and corporate satisfaction with government policies, merit careful consideration.


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  • 동아시아 금융협력의 비전과 과제: CMIM 20년의 평가와 새로운 협력 방향
    East Asian Regional Financial Cooperation: Visions and Challenges

       After the East Asian financial crisis in 1998, the need to strengthen financial cooperation, including liquidity support at the regional level, emerged. Accordingly, the Chiang Mai Initiative (CMI) was signed at the A..

    Deok Ryong Yoon et al. Date 2020.12.30

    Economic cooperation, Financial integration

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       After the East Asian financial crisis in 1998, the need to strengthen financial cooperation, including liquidity support at the regional level, emerged. Accordingly, the Chiang Mai Initiative (CMI) was signed at the ASEAN+3 Finance Ministers’ Meeting in 2000, and institutional efforts to strengthen regional financial cooperation have been continued for 20 years. The outcomes of this effort include the Chiang Mai Initiative Multilateralization (CMIM) and the Asian Bond Market Initiative (ABMI). However, it is difficult to find countries actively utilizing them. For example, even though the blockade caused by the spread of COVID-19 in 2020 led to a decline in economic activity and suffered instability in the foreign exchange market, none of the ASEAN+3 countries attempted to resolve market instability by using regional financial cooperation mechanisms. Under this circumstance, we try to find the reason for the poor use of CMIM. First of all, CMIM is linked to the International Monetary Fund, so it cannot be free from the sigma effect. The size of support is also small, as well as using the holding amount. Chapter 2 pointed out the lack of leadership and vision as the cause of the failure to improve even though there was the awareness of such institutional weakness in the region. Therefore, a plan to increase the effectiveness of CMIM was suggested as follows. First, we suggest establishing a “CMIM Fund” and the future vision of regional financial cooperation by introducing regional currency cooperation and regional settlement systems in connection with financial cooperation. Second, It will also helpful to bring Australia and New Zealand as new member states. This is to take advantage of the developed financial industries of those countries while coming out of the sluggish financial cooperation caused by political conflicts between the existing member states. ABMI, which has been performing the most within the ASEAN+3 framework, has taken the strategy of presenting a new roadmap every certain period of time, thereby facilitating the introduction of financial infrastructure and institutions in the ASEAN region as well as the development of the local currency denominated bond market. However, due to the gap in the level of economic development among member countries, there are limits such as the continuing difference in the degree of development of the bond market between ASEAN+3 countries and the still large regional infrastructure investment gap. Chapter 3 proposes a multilateral and bilateral approach to improving the financial settlement infrastructure and expansion of regions including Australia and New Zealand to address these problems. In Chapter 2, the participation of Australia and New Zealand to improve the governance structure of CMIM was considered. In terms of the local currency bond market, it is interesting to discuss with Australia. As of the second quarter of 2020, the size of the bond market in Australia is $2.19 trillion, similar to the size of the Korean bond market. The peculiar thing is that the share of financial institution bonds is 53.9%, which is considerably higher than that of the US, UK, and Japan. In addition, as the share of raw materials in Australia’s export composition is close to 60%, the Australian dollar shows a high positive correlation with raw material prices. In other words, unlike most advanced countries’ currencies, it has the property as a risky asset that reacts sensitively to fluctuations in commodity prices. This can be interpreted as, for example, that there are many cases of moving in the opposite direction to Japanese yen assets, and it can be seen that it helps to organize an optimal portfolio. Therefore, attempts to expand ABMI’s regional reach, including Australia and New Zealand, which are pursuing policy strengthening of cooperation with ASEAN will be meaningful. Chapter 4 looks at monetary cooperation between East Asian countries and explores the possibility of new cooperation through the use of Central Bank Digital Currency (CBDC) in this region in the future. The fundamental reason why East Asian monetary cooperation has not been successful is that it has set a low-realistic goal of stabilizing exchange rates in the region. Therefore, we would like to consider setting a more specific goal of “cooperation in issuance and common use of CBDC” and think about ways to achieve more visible results. Still, the cross-border payment and settlement process involves problems due to high costs, risks, and uncertainty in transactions. If CBDC is introduced and can be used for international payment and settlement, this problem can be solved in terms of improving the efficiency of payment settlement and promoting the internationalization of the local currency. However, in order to realize this, cooperation between central banks of regional countries is essential for the holding and using the CBDC. Cooperation through the CBDC may lead to a change in the international monetary order centered on the US dollar, and in the process of cooperation, international capital movements may be promoted, leading to further fluctuation of exchange rates. However, rather than reducing options due to excessive concern about this, we suggest that the time has come when efforts to realize the potential of cooperation through CBDC are needed. The effect of promoting the international use of Korean won could also be achieved. More specifically, it is possible to consider raising the “cooperation through CBDC” as a new agenda at the ASEAN+3 Finance Ministers and Central Bank Governors Meeting or Regional Comprehensive Economic Partnership (RCEP). In Chapter 5, we present new options that can be considered in order to escape the inactivity of financial cooperation in East Asia and cultivste the cooperation. In other words, from the perspective of change the existing cooperation structure centered on ASEAN+3 into a new one, it is transforming into regional development cooperation and expanding and moving its center country to Northeast Asia. The Northeast Asian region has great growth potential and enormous demand for investment, as it is called “the last major economic resort of the Asian continent”. However, since funds are insufficient to satisfy this, the establishment of a development financial institution in Northeast Asia is proposed as an additional method like Northeast Asia Development Bank, Northeast Asia Infrastructure Fund, and Northeast Asia Development Corporation. As a result of comparing and analyzing these three alternatives from various angles, the Northeast Asia Development Corporation seems to be the most suitable. The reason is that it does not require membership qualifications in international financial institutions when supporting funds first, allowing efficient allocation of funds. In addition, development-related banks in each country can avoid the form of international organizations, and local governments instead of central governments can participate, making it easy to establish. In addition, there are many other advantages, such as encouraging private participation and, from the standpoint of Korea, fostering the asset industry and enabling efficient use of long-term capital. However, in consideration of the fact that it cannot be free from political issues, some cautions are needed regarding the implementation system of the Northeast Asia Development corporation. First, rather than the government’s direct initiative, development banks, such as development banks and export-import banks, should lead the establishment, while encouraging the participation of private financial institutions in the region by emphasizing its commerciality to attract public-private cooperation. Second, it is not necessary to exclude China’s participation itself, but it is desirable to avoid letting China play a key role. This is because China’s pursuit of a one-on-one route and already high in its own fundraising capacity cannot rule out the possibility that this participation will be part of an external strategy rather than a regional development and cooperation level. Third, the Northeast Asian Development Corporation should also actively promote cooperation with existing multilateral development banks, such as Asian Development Bank (ADB) and European Bank for Reconstruction an Development (EBRD). Fourth, in order to focus on the aspect of financing necessary for the development of the Northeast Asian region, it can have a practical effect to establish the Northeast Asian region as the scope of activities of the Northeast Asian Development Corporation rather than encompassing all countries subject to economic cooperation with the New Northern Policy. In Chapter 6, we also propose a transition to the subject of financial cooperation, which is the transition from ASEAN countries to Central Asia, a relatively underdeveloped partner with high demand for development finance. These regional alternatives are Mongolia and Central Asia, which have been alienated from the target of financial cooperation so far in order to prepare Korea’s response strategy to Japan, led by the Asian Development Bank, and China, led by the Asian Infrastructure Investment Bank (AIIB). Cooperation is needed to encompass five countries (hereinafter, Mongolia and five Central Asian countries collectively referred to as Central Asia). Specifically, the “Korea-Central Asian Financial Cooperation and Training Center (tentative)” will be established as soon as possible for Central Asia to maintain the momentum of financial cooperation, and to expand the scope of cooperation to macro-financial fields including KRW settlement cooperation. This should be promoted in a direction that supports cooperation in the real sector, such as discovering new growth engines of the Korean economy in the long term, and finally, we need to build Korea-Europe-Central Asia’s trilateral financial cooperation system through cooperation with Europe, especially EBRD. As discussed above, this study proposes a new policy alternative to overcome the limitations of East Asian financial cooperation. Of course, more precise preparation is needed to implement these alternatives, and it is also acknowledged that the topics covered in this study are only a part of regional financial and monetary cooperation. However, in overcoming the limitations so far, it is hoped that it can be a contribution that provides at least a hint of thought, and it is expected to be more concrete in future studies.
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  • 개혁·개방이후 중국의 제조업 분야 산업정책과 산업구조 변화 연구
    A Study on the Changes in China’s Industrial Policies and Industrial Structures in Manufacturing Sector after China’s Reform and Opening

       As China's recent industrial advancement has changed the trade structure between Korea and China from a complementary relationship to a more competitive one, the need for research on Chinese industrial policy has incr..

    Wonseok Choi et al. Date 2020.12.30

    Industrial structure, Industrial policy China

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       As China's recent industrial advancement has changed the trade structure between Korea and China from a complementary relationship to a more competitive one, the need for research on Chinese industrial policy has increased. This report aims to analyze and evaluate changes in major industrial policies and industrial structures following China's reform and opening, thus enabling better understanding of China's industrial policies and forecasting the direction of China's industrial policies during its 14th Five-Year Plan period. In particular, unlike previous studies, this report classified China's major manufacturing policies into four types after China's reform and opening, and proposed Korea-China industrial cooperation through policy analysis and comprehensive evaluation.
       Chapter 2 divides China’s industrial policies into four stages after the initiation of reform and opening-up, and described the trend of major industrial policies by period. The first stage is the market economy exploration stage (1978-1991), when industrial policies first began to be introduced in China, focusing on adjusting proportional relations such as imbalances between the agricultural and industrial sectors, and light and heavy industries. The second stage is the initial construction stage of the market economy (1992-2001), during this period, policies to foster key industries were implemented, direct intervention by the government in promoting industrial policies was reduced and the transition to guide-type intervention began. The third stage is the stage of full-scale and in-depth reform (2002-2012), when the government began to foster high-tech industries after declaring the path to “new industrialization” in November 2002. Since the global financial crisis of 2008, the government has also promoted strategic emerging industries as a new growth engine, while implementing 10 major industrial promotion and coordination policies in response to the issue of oversupply. From 2013 to the present, various strategies to strengthen manufacturing power, such as the China Manufacturing 2025 and Internet+ initiatives, are being pursued to further promote full-scale reform within the country. However, as competition for trade and technology hegemony between the U.S. and China intensified, new industrial policies were needed to cope with this, and the 14th Five-Year Plan presented the direction of industrial policies focused on securing core technologies through innovation.
       Chapter 3 summarizes and evaluates China's industrial development policy, industrial restructuring policy, industrial organization policy, industrial technology policy and the timing characteristics and direction of policy measures. The industrial development policy was carried out by selecting industries that did not meet market demand at each period to supply resources first, and to intensively foster industries that will lead the national economy now or in the future. In this process, the size of the industry grew and the industrial structure advanced, but indiscriminate overlapping investments in industries designated by the government resulted in oversupply or quantitative growth without yielding core technologies. To solve the problem of oversupply, the Chinese government implemented various industrial restructuring policies for each period.
       China's industrial restructuring policy changed from a uniform control of production and construction of various industries to an approach where specific targets were set for the liquidation of redundant businesses or management and support measures to make each local government and company more active in removing underdeveloped facilities. In addition, instead of determining targets based on size, comprehensive indicators such as technology and environmental pollution began to be considered as well. However, the concrete achievements of these policies still remain limited due to the sheer scale of long-term policies conducted and the protection of local governments.
       Through industrial organization policy the government engages market structures and market activities to maximize market performance. Implemented since the reform and opening of the market, the policy has focused on establishing a modern corporate system and the order of market competition. The recent rapid growth of the digital economy is expected to have a significant impact on China's industrial ecosystem and business activities, leading to the revision of the anti-trust law in 2020 for the first time in 11 years in response to the possibility of a small number of Internet (platform) conglomerates exploiting a monopoly in the market.
       Industrial technology policies are a series of policies enacted by the Chinese government to promote industrial development, enhance industrial technology innovation capabilities, and advance industrial technology. For about 40 years since the reform and opening of its market, China's industrial technology policy has evolved through the stages of simple technology introduction, to absorption and assimilation of these technologies, and then to autonomous innovation. Technology development is increasingly being led by the corporate sector, instead of directly planned and controlled by the government. Recently, policies to promote and support industrial-academic cooperation in China are expected to be implemented to drive the independent development of key technologies in response to U.S.-China technology conflicts.
       In the 1980s, China mainly used government intervention measures such as government investment, state-owned bank loans, tax revenues and plans, but after the reform to introduce a socialist market economy, direct intervention by the government has gradually been reduced and replaced with market-based means applied in the form of state guidance and economic or legal measures. The government is expected to focus more on identifying efficient industrial policies through means that utilize the market rather than direct means such as government subsidies, which run the risk of trade disputes.
       The major milestones of China's industrial policy can be summed up as its rise as the world's largest manufacturer, securing stability in industrial development through long-term policy implementation, upgrading industrial structure, and technological development. However, increasing problems with overlapping investments and oversupply, increasing dependence on state-owned companies and improving inefficiency, and international disputes over industrial policies are major policy tasks to be resolved.
       Chapter 4 analyzes changes in China's industry, trade, and Korea-China trade structure due to the effects of industrial policies after reforms and opening, as presented in Chapter 2 and 3. First, the core of China's industry has shifted from light industries to heavy industries in accordance with policies to upgrade the industrial structure. Second, due to policies to foster high-tech industries since the early 1990s, the proportion of high-tech industries has increased and the technology level of manufacturing has increased. Third, localization and domestic industrialization are proceeding in line with policies to foster domestic companies. According to these changes in China's industrial structure, Korea's exports to China have gradually advanced from labor-intensive to technology-intensive industries, while Korea's import and export dependence on China has increased. However, as Korea's coefficient of correlation between exports and investment to China is gradually increasing, the coefficient of inducement of imports and exports to China per unit of investment in China has continued to decline.
       Based on this analysis, the results of a panel regression analysis of Korea-China industrial data from 1997 to 2017 showed that Korea's exports to China increased as China's exports to the world increased. In addition, there was a trend in which Korea's exports to China increased since 1997, but this rise tapered off between 2012 and 2017, indicating that the synchronization of Korean and Chinese exports decreased. This result indicates that Korea has driven export growth to China in the past by supplying intermediate goods needed for China's heavy industry development policy and export-led growth method, but has failed to respond to changes in demand caused by the advances in China’s industrial structure and technological innovation policies centered on high-tech industries.
       Chapter 5 presented trade risks and Korea's strategies due to the impact of friction between the U.S. and China, and changes in the direction of China's industrial policy. First of all, we propose ways to cope with U.S.-China friction by diversifying export markets, analyzing changes in the Korea-China industrial cooperation environment, preparing industrial technology protection policy in Korea, diversifying global supply chains and participating in China’s value chain to target its domestic market.
       We also emphasize the need for research on industrial policies and the process of creating related industrial ecosystems as China's industrial policies gradually change from simple to comprehensive policies. In response to the expansion of China's industrial influence in state-of-the-art technology, there is a need to redefine long-term industrial policies in new industries. This was followed by a proposal of promising areas to focus cooperation efforts, identified by comparing China's industrial policies and related strategies in Korea.
       As our analysis indicates that Korea's supply capacity for China's new growth industry will become increasingly important in choosing opportunities and strategies for Korea-China economic cooperation, our study divides products in the areas of materials, parts, and equipment according to three classifications based on China's growth and Korea's trade competitiveness.
       Finally, efforts to maximize the performance of the Korea-China FTA in China's growth industry, urge China to comply with international rules and rules in promoting new industries, respond to China's independent standardization, and strengthen Korea-China cooperation in digital economy and environment.
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  • 일본의 ‘사회적 과제 해결형’ 4차 산업혁명에 관한 연구
    Japan’s 4th Industrial Revolution Efforts in Response to Social Challenges

       This research aims to present policy implications to the Korean government and private companies by providing an in-depth analysis on how the Japanese government and companies deal with the country’s so-called “soci..

    Gyupan Kim et al. Date 2020.12.30

    ICT economy, Economic cooperation Japan

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       This research aims to present policy implications to the Korean government and private companies by providing an in-depth analysis on how the Japanese government and companies deal with the country’s so-called “social challenges” using the technologies of the 4th Industrial Revolution. In order to do this, this study chose 1) health, medical care and nursing, 2) manufacturing, logistics and mobility, and 3) regional revitalization as its fields of focus, and examined how the Japanese government and private companies utilize the 4th Industrial Revolution technologies—namely, Artificial Intelligence (AI), Internet of Things (IoT), Big Data, etc.—in addressing the country’s social issues.
       In chapter 2, “Japan’s ‘Social Challenges’ and the 4th Industrial Revolution,” this research analyzes the social cost of Japan’s low birthrate and aging population in terms of its fiscal sustainability, medical costs and regional imbalance. Then it looks into the Japanese government’s 4th Industrial Revolution policy and the digital transformation (DX) movement further stimulated by the spread of COVID-19.      
       Chapter 3, “Health, Medical Care and Nursing Sector,” examines the Japanese government’s efforts to utilize health data including regulatory reforms and its “Data Health Reform” policy. It also introduces some model cases of corporate-level utilization of health and medical big data. It was noted that remote medical treatment is rapidly spreading in Japan, after the country temporarily eased restrictions on remote medical care in April, 2020, following a spike in the coronavirus cases.
       In chapter 4, “Manufacturing, Logistics and Mobility,” this research firstly analyzes the Japanese government’s efforts to connect different manufacturing companies’ digital platforms, and presents some case studies of Japanese manufacturing companies’ utilization of 4th Industrial Revolution technologies, such as AI, IoT, 5G, etc. Next, in the mobility sector, this research examines the Japanese government’s movements in the area of Mobility as a Service (MaaS), including its roadmap, pilot operations, policy supports and commercialization efforts. Finally, the Japanese government’s policy supports for DX in the logistics field were analyzed. 
       Chapter 5, ”Regional Revitalization,” introduces Japan’s efforts at dealing with the growing regional imbalance by using the technologies stemming from the 4th Industrial Revolution. This chapter focuses on the three topics of creating a regional IoT Platform, implementing 5G networks and smart city construction as distinctive examples of Japanese (central and regional) governmental efforts at regional revitalization.  
       Finally, chapter 6 suggests policy implications for the Korean government. First, for the health, medical care and nursing sector, this research presents three proposals for the government: institutional reforms and data standardization in healthcare, broader collection and utilization of nursing data, and engaging in an active discussion on how to expand telemedicine. In the manufacturing, mobility and logistics sector, this research suggests supply chain optimization across the entire chain, as opposed to merely implementing smart technologies in a manufacturing plant, and introduction of MaaS and DX in the mobility and logistics fields. Regarding regional revitalization, this research draws policy implications from Japan’s regulatory reforms, which helped shift the focus of its regional DX policy from “technology” to “problem- solving,” and from a supply (provider)–driven approach to a demand-driven approach. 


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  • 신용공급 변동이 경제성장 및 금융위기에 미치는 영향
    A Study on Credit Supply, Economic Growth and Financial Crisis

       This study investigates the impacts of credit supply on economic growth and financial crisis. While credit supply helps boost economic growth through resource reallocation, excess credit supply can make the economy an..

    Hyosang Kim et al. Date 2020.12.30

    Financial crisis, Financial policy

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       This study investigates the impacts of credit supply on economic growth and financial crisis. While credit supply helps boost economic growth through resource reallocation, excess credit supply can make the economy and financial market more vulnerable. In the event of a negative shock to the financial or real sector in a situation where credit is excessively supplied, asset prices sharply fall as the deleveraging proceeds. Moreover, economic activity can be sharply shrunk, thereby expanding the width and duration of the recession. The rapid credit crunch and stock price plunge that appeared in the early stages of the COVID-19 pandemic highlight the phenomenon in March 2020.
       Chapter 2 presents qualitative analysis and event studies to describe the relationship between credit supply, economic growth, and financial crisis. In the qualitative analysis, we visualize the long-term relationship by comparing the household, corporate, and government credit with macroeconomic variables in each country. In the cross-country comparison, the correlation of household credit and consumption is negative, while that of corporate credit and investment is positive, suggesting that the impact on economic growth is different for each type of credit. Moreover, to examine the relationship between private credit and GDP growth, we find that GDP generally grows faster in the group where private credit expands rapidly. This relationship, however, blurs in the highest-income group. In the event study, we consider the relationship between credit expansion and the financial crisis. We observe that private credit increased significantly before the banking crisis, including the global financial crisis. This phenomenon is particularly noticeable in advanced economies.
       Chapter 3 examines a dynamic relationship between private and government credit and various macro variables by estimating the panel VAR model. Household credit shocks tend to increase real GDP in the short-run, mainly by boosting consumption. However, in the long-run, real GDP tends to be decreased by appreciating the real exchange rate, increasing non-tradable goods production, and decreasing productivity and current accounts surplus. On the other hand, the corporate credit shock is opposite to the household credit shock. Its impacts on real GDP are relatively small, leading to the real exchange rate decreasing and the production of trade goods. The macro variable responses to the government credit shocks are clearly distinguished from private credit shocks, but overall significance remains statistically low.
       In Chapter 4, we analyze the effect of credit supply on the possibility of a financial crisis using the panel probit model. We find that the household credit expansion significantly increases the probability of a banking crisis, while it does not affect the probability of a currency crisis. On the other hand, corporate credit expansion increases the probability of all types of crises. Government credit expansion tends to increase the probability of a government debt crisis. However, it is statistically insignificant for the period before the other type of crisis, suggesting that the rapid government credit expansion in response to a financial crisis rather than the level of government credit increases the likelihood of a government debt crisis. Moreover, government credit expansion has the effect of lowering the probability of a banking crisis and a currency crisis, supporting the counter-cyclicality of government credit.
       In 2020, in the responses to the economic shock of the COVID-19 pandemic, the level of both private and government credits are sharply increased due to the massive fiscal stimulus programs and expansionary monetary policy. The impacts of household, business, and government credit on the macroeconomics can differ, so policymakers should pay attention to the level of total credit and the change in the composition of credit. In particular, it should be aware that the economic stimulus through short-term boosting of aggregate demand can lead to a deeper downturn by deteriorating in long-run productivity.
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  • 국내 증권시장에서 외국인 자금 이동 결정요인 분석: 금리와 환율을 중심으로
    Determinants of Foreign Security Investment: Focusing on Interest Rates and Exchange Rates

       As the linkage between domestic and foreign financial markets grows stronger, concerns have been raised about the inflow and outflow of foreign investment capital as a source of financial instability whenever the fina..

    Deok Ryong Yoon et al. Date 2020.12.30

    Financial policy, Exchange Rate

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       As the linkage between domestic and foreign financial markets grows stronger, concerns have been raised about the inflow and outflow of foreign investment capital as a source of financial instability whenever the financial market becomes unstable. This is because, as the volume of capital inflows and outflows increases and volatility rises in the market, the financial system becomes more vulnerable and financial market price variables and macroeconomic uncertainty are increasing. Considering that opening the capital market is not an option, it becomes essential to examine the determinants of foreign investment to maximize the benefits of foreign capital inflows and outflows for sound growth in the real sector as well as the financial sector. Accordingly, this study attempts to produce evidence-based policy implications by empirically analyzing the determinants of the inflow and outflow of foreign investment funds.
       Chapter 2 examines the trends of foreign investment-related systems and capital flows. Regulations in the system for foreign securities investment began to ease after the late 1990s, increasing the volume of foreign funds flowing into the stock and bond markets (Table 1). In particular, it has been observed that index funds have increased due to a decrease in active investment and increase in passive investment in the stock market. Also, the turnover rate of foreign stock investment is rising. In the bond market, foreign investment is continuously increasing, and due to the increase in duration and diversification of investors, changes are being detected both in quantitative and qualitative terms. From this, three policy implications can be drawn. First, the increase in passive funds in equity investment implies that the importance of risk management for financial market stability increases. Second, since the movement of bond funds is often determined by the volatility of the exchange rate, management of volatility in the foreign exchange market may be an important condition for the stable maintenance of foreign bond investment. Third, it is necessary to improve the investment environment to increase the inflow of foreign investment funds into the Korean financial market and maintain a long-term growth trend. To this end, it is necessary to consider enhancing the stability of the foreign exchange market by strengthening the global financial safety net and strengthening the transparency of foreign investment-related systems.
       Chapter 3 analyzes the determinants of foreign investors’ stock investment, and the main results and implications derived from them are as follows. First, when foreigners invest in domestic stocks, they consider the foreign interest rate (push factor) as a more important decision-making factor than the domestic interest rate (pull factor). This suggests that Korea’s monetary policy may have a limited impact on the inflow and outflow of foreign investment funds. Second, foreigners’ selling and buying of stocks were affected by different rates of return. When purchases and sales of stocks were at low levels, the Dow Jones yields was an important factor in buying stocks, but the KOSPI return was an important factor in selling stocks. Third, depending on the policy target and the market phase, different policy measures should be selected. For example, there was a difference between a model well-suited to explain the net buying of stocks and another to explain the buying and selling of stocks. Net buying of stocks was best explained by global liquidity, while buying and selling of stocks were better explained by risk indicators. In addition, since the effective determinants differ between the two phases and the sign (direction) of the effect on the variables is different, this implies that the policy authorities can achieve the intended policy objectives by considering different policy measures according to the phases. Fourth, when the outflow of foreign stock investment is high, volatility is high as well. In general, the ripple effect caused by the outflow of foreign funds occurs in the short term, and given that policy responses are difficult, it poses a huge policy challenge for policy authorities. Foreign capital outflows are highly volatile, and the effects of foreign capital outflows can occur in the very short term and disrupt the financial market, as experienced in the Asian foreign exchange crisis and global financial crisis.
       Chapter 4 analyzes the determinants of foreign investors’ bond investment, and four main points can be derived from this. First, foreign bond investment is sensitive to interest rates and exchange rates. Interest rate was a significant determinant not only for the total amount of net purchase, but also for each maturity and phase. The effects of interest rates on long-term bonds were particularly significant in the case of bond purchases. As the proportion of long-term bond investment is likely to increase gradually in the future, it is necessary to understand the impact of interest rate variables on bond purchases. Won-euro and won-dollar exchange rates had a significant effect on both short- and long-term bonds when the level of foreign investment was high. Therefore, when the size of foreign investment is large, attention should be paid to the effect of exchange rates on foreign investment. Second, foreign stock investment and bond investment are related to each other. Therefore, when implementing a policy related to foreign investment, it is necessary to clarify the object of the policy implementation. In addition, bond investment within three years of maturity and net purchase of stocks mainly had a complementary relationship. This points to the need to also closely observe foreigners’ investment trends in the stock market when analyzing foreign investment trends in the bond market. Third, for foreign bond investment, variables related to developed markets are more significant than those related to emerging markets. Therefore, in order to predict foreign bond investment trends, it is necessary to closely examine the situation in the stock markets of developed countries. Fourth, macroeconomic variables have a significant impact on foreigners’ bond investment, and are particularly important determinants when foreigners invest in long-term bonds. Therefore, it is important to increase the stability of macroeconomic variables in order to maintain stable levels in foreign bond investment in the future.
       Chapter 5 proposes three policy implications based on the current status of foreign stock investment and empirical results. First, it was proposed to consider the qualitative aspects of expanded foreign securities investment funds to develop the financial market and mitigate volatility in securities prices and foreign exchange markets. Next, it is necessary to reinforce monitoring of securities investment in order to accurately grasp the policy environment and design policies accordingly. Lastly, there is a need to improve the governance structure for external soundness to enable integrated management and supervision of the foreign stock and bond markets and foreign exchange markets that are linked to each other although they are different markets.

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  • 아시아·태평양 지역의 디지털화와 한국의 협력방안
    Digitalization in Asia-Pacific Region and Policy Implications for Korea

       This study examines the progress of digitalization in the Asia- Pacific region, compares and analyzes the digital transformation policies of major economies in the region using text mining techniques, and demonstrates..

    Yungshin Jang et al. Date 2020.12.30

    APEC, ICT economy Southeast Asia Ocean

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       This study examines the progress of digitalization in the Asia- Pacific region, compares and analyzes the digital transformation policies of major economies in the region using text mining techniques, and demonstrates the effect of the digital gap on economic performance by dividing the regional economic development stage by individual country. Also, an empirical analysis was performed on how the difference in access to digital technology and intensity of use has an impact not only on the overall economic performance of a country but also labor market performance through the mechanism of individual human capital accumulation. The analysis results suggest APEC and its member economies focus their capabilities on digital inclusion policies. And the results propose a direction for strengthening APEC’s function as an international cooperation platform for digital inclusion in the region, and a cooperation plan for strengthening digital cooperation in Korea.
       Chapter 2 compares the progress of digitalization in each stage of economic development in the Asia-Pacific region and the digital competitiveness of significant economies in the region, and examines the status of digital economy cooperation in APEC fora. The digital gap between high- and low-income member economies of APEC is examined using ICT indicators published by the International Telecommunication Union (ITU). According to the results of our comparative analysis of digital competitiveness in 10 major developing economies in the region, using the IMD World Digital Competitiveness Ranking, etc., there was a digital gap by income group within APEC in terms of the quality of ICT infrastructure utilization and companies’ ICT utilization. But, fortunately, the gap appears to be shrinking in terms of ICT accessibility. After adopting the APEC Action Agenda for the Digital Economy and APEC Internet and Digital Economy Roadmap for the first time in APEC’s core agenda in 2017, the number of digital economy-related cooperation projects within the APEC fora has steadily increased.
       In Chapter 3 text mining techniques are used to compare and analyze critical areas of digital transformation policy pursued by major developing economies such as Malaysia and Vietnam and leading APEC members in the digital sector such as Korea and the United States, China, and Japan. While certain differences exist, digitally leading countries tend to focus on basic and applied research, talent attraction, and development. In contrast, digitally developing economies focus on public sector reform and infrastructure creation. The results also confirm that both digitally developed and developing economies’ groups have focused on using digital transformation as a tool for economic growth rather than improving digital inclusion and international cooperation. Also, these policies have been implemented within each country rather than as a form of international cooperation.
       Chapter 4 analyzes the impact of progress on digitalization in the Asia-Pacific region on economic growth and income inequalities. For this, we measure the degree of digitalization at the country level by ICT accessibility (e.g., the sum of fixed telephone subscriptions per 100 people and mobile cellular subscriptions per 100 people) and ICT use intensity (e.g., the ratio of fixed broadband subscriptions to individuals using the internet). We first study the relation between digitalization and economic growth using country-level panel data. We construct two samples for comparison: one the total sample, which consists of 114 economies globally, and the other the APEC sample, which consists of 17 out of the 21 APEC member economies for which data was available. According to the estimation results, economies with larger ICT accessibility have higher economic growth rates for both samples. We also find that ICT use intensity increases economic growth rates for both samples. We also study the relation between digitalization and income inequality using country-level panel data. We construct two samples for comparison: one the total sample, which consists of 134 economies globally, and the other the APEC sample, which consists of 18 out of 21 APEC member economies for which data was available. According to the estimation results, ICT accessibility tends to reduce Gini coefficients for both samples. Regarding the effects of ICT use intensity, the results are reversed: ICT use intensity tends to raise the Gini coefficient for both samples. But the estimates are not statistically significant for the APEC sample. We further study if the effects of digitalization on income inequalities are different across income levels. For high-income economies, ICT accessibility and ICT use intensity negatively affect income inequalities, while for low-income economies, ICT accessibility tends to improve income inequalities.
       In Chapter 5, we study how digitalization affects labor market outcomes using individual workers’ survey data. In particular, we investigate how individual workers’ digitalization affects the probability of being employed and wages. For this, we produce the survey data of individual workers in Korea and Vietnam. We select Korea, which belongs to the high-income group in the APEC economies and Vietnam, which belongs to the low-income group. We measure the level of individual workers’ digitalization classifying individual workers’ ICT accessibility, ICT use intensity, and interaction between ICT use intensity and human capital. According to the estimation results, workers who use ICT more intensively are more likely to be employed and to receive higher wages for both Korea and Vietnam samples. However, the statistical relationships are weak in the Vietnam sample. The different results between Korea and Vietnam samples may be because there are more ICT skill-related jobs in Korea than in Vietnam. Here, workers’ ICT use intensity is measured by the ratio of working hours spent using the internet (or computer or mobile phone) to total working hours. We also measure ICT use intensity qualitatively by constructing an index based on information about workers’ various ICT-related activities such as obtaining data and information via the internet, looking for and applying for a job via the internet, internet banking experience, etc. We find that workers with higher ICT use quality index are more likely to be employed and have higher wages for the Vietnam sample. These results imply that the variables that measure ICT use intensity qualitatively capture better the labor market impacts rather than quantitative approaches. Regarding the effects of ICT accessibility, we find that the results are different between the two samples. For the Korean sample, ICT accessibility does not much affect labor market outcomes, while ICT accessibility improves the probability of being employed for the Vietnam sample. This result is mainly    due to the difference in ICT accessibility between Korea and Vietnam: Almost all workers in the Korea sample can access ICT-related devices such as mobile phones and computers and the internet.
       The analyzed results above indicate that APEC and its member economies should focus their policy capabilities on digital inclusion to minimize the side effects of the national and individual digital divide which can appear as digitalization progresses. Chapter 6 presents three criteria to be considered when APEC sets the direction to strengthen its function as an international cooperation platform for digital inclusion in the region. First, considering convergence is a prevalent feature of the digital economy, the collaboration within APEC fora should be emphasized in digital inclusion cooperation across various subjects and areas. Second, in consideration of APEC’s economic status as the world's most extensive regional cooperation body, cooperation among the APEC economies should be emphasized so that the different interests of the economies in various economic development stages on digitalization and digital inclusion can be synchronized and balanced. Third, considering APEC has consistently emphasized public-private cooperation, unlike other international organizations and regional councils, the triangular cooperation channel between government, private enterprises, and experts within APEC should be effectively utilized on digital inclusion.
       Under these three principles, in strengthening the APEC’s function as a platform for digital inclusion, we present five cooperation initiatives for Korea, as a leading economy in the digital sector, to establish itself early on in the agenda for digital inclusion within APEC and become a rule-setter in the area. First, we propose that APEC build a collaborative culture among APEC fora by improving project evaluation criteria. Considering the issues have cross-cutting and convergence features, this improvement could induce APEC to address more digital inclusion issues and endorse more joint projects on digital inclusion. Second, Korea could propose a project on discovering effective digital inclusion policies within APEC economies and sharing their success stories. For example, based on its experiences with the Digital New Deal policy, Korea could play a leading role in proposing research projects on holding workshops or publishing books about best policies and practices regarding digital inclusion. Third, Korea can position itself as an early mover in digital inclusion agenda in the healthcare sector by proposing or cooperating with other APEC economies on digital healthcare projects, considering the importance of digital healthcare in the post-pandemic world. For example, building and improving on the “K-Quarantine” online platform in cooperation with other economies interested in the platform could be a promising approach. It would be possible for Korea to beneficially share its strong experience and rich data in combating COVID-19 with other APEC members through the online platform. Fourth, we also suggest that Korea should play a leading role in devising and improving digitalization measurement indexes and indicators, taking into account the stages of economic development and conditions in the APEC region. These could contribute to strengthening research on digital inclusion within the APEC regions by providing essential data to study digital inclusion, such as measuring the impacts of digitalization or digital divide on economic growth or inequality. Fifth, we propose establishing an digitalization integrated data information system for the APEC region to collect and manage data showing the status of digitization of APEC member economies in the long term. To make it possible, as an ICT leader, Korea should play an active role in the process of designing and constructing the system.
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