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Policy Analyses
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Firm Heterogeneity in the Choice of Offshoring: Evidence from Korean Manufacturing Firms
Using firm-level data on offshoring of Korean manufacturers, the paper examines the relationship between firm heterogeneity and the probability of adopting offshoring. The results of the paper suggest that firm productivity may no..
Hea-Jung Hyun Date 2009.06.10
Business management, Overseas direct investmentDownloadContentExecutive Summary
I. Introduction
II. Data Description
III. Model
IV. Empirical Results
V. Conclusions
References
AppendixSummaryUsing firm-level data on offshoring of Korean manufacturers, the paper examines the relationship between firm heterogeneity and the probability of adopting offshoring. The results of the paper suggest that firm productivity may not be an important determinant for Korean firms' offshoring decision. Firm's global sourcing decision may rather depend on other characteristics such as factor intensity, R&D intensity, ICT level, and affiliation with foreign markets, when industry specificity is controlled for. -
Using Panel Data to Exactly Estimate Income Under-Reporting by the Self‑Employed
The income of the self-employed is often assumed to be understated in economic statistics. Controversy exists about the best method for estimating the extent of under-reporting and about the resulting measures of the size of the u..
Bonggeun Kim et al. Date 2009.06.10
Labor market, Tax systemDownloadContentExecutive Summary
I. Introduction
II. Methodology
III. Empirical Analysis
IV. Discussion and Conclusions
References
AppendixSummaryThe income of the self-employed is often assumed to be understated in economic statistics. Controversy exists about the best method for estimating the extent of under-reporting and about the resulting measures of the size of the underground economy. This paper refines a method developed by Pissarides and Weber (1989) and uses discrepancies between food shares and reported incomes of the self-employed and other households to estimate under-reporting by the self-employed. In contrast to previous studies our panel data methodology distinguishes income under-reporting from transitory income fluctuations of the selfemployed, and provides an exact estimate of the degree of underreporting rather than just an interval estimate. Using panel data from Korea and Russia we estimate that 38 percent of the income of selfemployed households in Korea and 47 percent of the income of Russian self-employed households is not reported. -
Outward Processing Scheme under FTAs: “Domine, Quo Vadis?”
Several modern free trade agreements (FTAs) contain a so-called 'outward processing' exception to their rules of origin. FTAs require that for goods from a Party to enjoy preferential treatment in another Party, the goods should b..
Norio Komuro Date 2009.04.30
Trade policy, Free tradeDownloadContentExecutive Summary
I. Introduction
II. Overview of the Outward Processing Scheme
1. FTA Rules of Origin
2. Rationale of the Outward Processing Scheme
III. Outward Processing Schemes under Europe's FTAs
1. EFTA's Initiative
2. Evolution of EFTA's Scheme
3. EEA Scheme
4. EC-Concluded Pan-European and Pan-Euro-MED FTAs
5. EC's FTAs with Non-European Countries
6. Common Features of Outward Processing Schemes under Europe's FTAs
IV. Outward Processing Schemes under Israel's FTAs
1. Israel-EC FTA
2. Israel-US FTA with the U.S. Unilateral Cumulation Regime
3. Israel-Canada FTA
4. FTAs between Israel and South American Countries
V. Outward Processing Schemes under Singapore's FTAs
1. Singapore-Pacific FTAs
2. Singapore-Asian Countries FTAs
3. Singapore-EFTA FTA
4. Singapore-U.S. FTA
5. Singapore-Jordan FTA
6. Trans-Pacific FTA
7. Singapore-Latin America FTAs
VI. Outward Processing Schemes under South Korea's FTAs
1. South Korea-EFTA FTA
2. South Korea-ASEAN 10 FTA
3. South Korea-U.S. FTA
VII. Assessment of Outward Processing Schemes
1. Definition of the Outward Processing Scheme
2. Benefits and Shortcomings of the Outward Processing Scheme
3. Legal Assessment of the Outward Processing Scheme
VIII. Conclusion
References
AppendixSummarySeveral modern free trade agreements (FTAs) contain a so-called 'outward processing' exception to their rules of origin. FTAs require that for goods from a Party to enjoy preferential treatment in another Party, the goods should be made without interruption in the FTA territory. An exception to this territoriality principle is the outward processing scheme. Under this exception, a producer in a Party may send materials to a non-Party for outward processing and re-import the processed goods for finishing. Final products can then enjoy the FTA preference from the importing Party provided that relevant conditions are met.
This paper examines various outward processing schemes under current FTAs concluded by, inter alia, Israel, the EU, EFTA, Singapore and South Korea, and compares them with neighbouring regimes (i.e.,
third-country content and third-country materials rules). This paper also assesses the scheme from economic-political and legal viewpoints. Finally, this paper suggests some solutions for overcoming problems with the scheme. -
Determinants of Staging Categories for the Tariff Elimination in the FTA Negotiations
The East Asian countries including Korea, China, and Japan were latecomers in FTA negotiations, beginning to consider the FTA policies since the late 1990s. This study analyzes the determinants of staging categories for the tariff..
Nakgyoon Choi Date 2009.04.10
Economic integration, Free tradeDownloadContentExecutive Summary
I. Introduction
II. Model Specification and Data
III. Empirical Results
IV. Summary and Policy Implications
ReferenceSummaryThe East Asian countries including Korea, China, and Japan were latecomers in FTA negotiations, beginning to consider the FTA policies since the late 1990s. This study analyzes the determinants of staging categories for the tariff elimination in FTA negotiations of East Asian countries, using a probit model. It is crucial for the successful completion of the FTA negotiations for goods to set up the product scope for tariff elimination and the exclusion list in the tariff schedule in order to maximize the national economic welfare. The empirical results indicate that the East Asian countries were not losers in determining the staging categories consistent with the pre-negotiation expectations. -
Development Cooperation for Social Safety Nets in East and Southeast Asia
Countries in East and Southeast Asia are currently undergoing unprecedented double shocks: globalization and demographic transition. To tide the economies over the globalization shock, some efforts have been made, especially in th..
Kye Woo Lee Date 2009.03.30
Economic development, Economic cooperationDownloadContentExecutive Summary
I. Double Shocks in the Region
II. Globalization and Social Safety Nets
1. Globalization and Economic Growth
2. Globalization and Inequality
3. Social Safety Nets
III. Demographic Transition in Developing Countries
1. Global Ageing Trend
2. Implications
IV. Demographic Transition in East and Southeast Asia
1. Transition
2. Domains of Development Cooperation
V. Social Safety Nets against the Demographic Transition
1. Coverage
2. Benefit Adequacy
3. Alternative Safety Nets
4. Financial Sustainability
VI. Financial Products and Labor Market Policies against the Demographic Transition
1. Complements to Social Safety Nets
2. Financial Market Products
3. Labor Market Policies
VII. Conclusions and Recommendations
ReferencesSummaryCountries in East and Southeast Asia are currently undergoing unprecedented double shocks: globalization and demographic transition. To tide the economies over the globalization shock, some efforts have been made, especially in the wake of the Asian crisis in 1997, strengthening the social safety nets. However, significance of the demographic transition and its impact has been barely recognized, and not many discussions have taken place on the policies and safety nets against the risks generated by it. Moreover, a wave of new world-wide economic crisis, engendered by the sub-prime mortgage incidents in the U.S., has been looming on the horizon. East and Southeast Asian countries have to undergird themselves to institutionalize adequate social safety nets for those adversely affected by the shocks. This paper attempts to highlight the nature and magnitude of the impact of the shocks, especially the demographic transition shock, and discuss policy needs, challenges, and issues in institutionalizing the social safety nets in the region. The paper concludes with recommendations including the role of international development cooperation. (The rest is omitted.) -
Growth Factors of the Service Industry in the United States and its Implications for Korea
Korea, a nation currently aiming to become one of the world's leading countries, is now facing the challenge of realizing sustained economic growth through the service industry. Since 2000, as Korea’s economy began to slow down, ..
Junkyu Lee et al. Date 2008.12.31
Economic development, Industrial structureDownloadContentSummaryKorea, a nation currently aiming to become one of the world's leading countries, is now facing the challenge of realizing sustained economic growth through the service industry. Since 2000, as Korea’s economy began to slow down, attention has been paid to the claim that the quality of employment could be raised via growth in the service sector. The purpose of this report is to offer an empirical analysis of growth factors of the U.S. service industry based on its deregulation policy in the service industry, and, in doing so, to understand its implications for the growth of Korea’s service industry.
In Chapter 2, the changes in the service industry are described, focusing especially on deregulation policies for the industry. Since the mid-1970s, the United States engaged in active deregulation in the major service industries such as finance, telecommunications, and transportation, which directly affects the overall economy. Given the deregulation of the 1980s, it could be characterized as the era of deregulation for the US economy, followed up by the subsequent promotion and intensification of deregulation. Repeal of the Glass-Steagall Act in 1999 provided significant motivation for the launching of investment banks, which was the result of the Reagan administration’s sustained regulatory reform.
Chapter 3 will briefly look at the relationship between the service and manufacturing industry in previous studies as well as examine this relationship closely through various statistical data and industry input-output tables. According to previous studies, the relationship between the two industries appears in various forms, and different conclusions in terms of production and employment can be drawn. In addition, by utilizing various statistical data, it shows to what extent the U.S. service industry contributed to GDP growth, and how each service section has grown or decreased.
Also, using the inter-industry relations table, this report examined the intermediate inputs in manufacturing sector-specific services, manufacturing sector- specific GDP and employment trends. Taking a look at the relationship between manufacturing sector-specific GDP and employment; in the garment/leather manufacturing industry, the relationship between GDP and employment shows a significant decrease in the GDP and employment trends. On the other hand, in case of oil and coal-related manufacturing and chemical manufacturing, employment is shrinking despite rapid increase in GDP. This outcome can be interpreted as the transition from labor-intensive manufacturing industries to capital-intensive industries through outsourcing from different sectors. In this process, assuming that the foreign variables and technological change is held constant, it is possible that outsourcing (or intermediate input) from the service industry was detrimental to manufacturing employment.
On the other hand, in case of machinery manufacturing; GDP, intermediate inputs, and employment display increasing trends. Aviation, shipbuilding, and aerospace manufacturing has shown a trend of growing employment. In addition, high value-added manufacturing such as computer, electronics, electrical equipment/ devices, automobiles and parts exhibit a trend of rapidly increasing input coefficients of the professional services. It can be understood as evidence supporting Antras’ (2003) and Helpman’s (2003) claim that firms with high productivity tend to insource in case of purchasing in-country which constitute intermediate inputs.
In chapter 4, growth factors for the U.S. services industry is empirically analyzed while highlighting the relationship with the U.S. services industry and economic growth as a whole. In order to analyze growth factors for the U.S. services industry, services sector growth was taken as a dependent variables; while services industry capital growth rate, services industry labor growth rate, inflation, deregulation, financial development index and R&D were used as independent variables. In addition, logistics services, producer services, personal services, social services were used as the dependent variable for each services industry while selecting capital and labor as independent variables.
At first, full service industrial empirical results showed that the service sector labor growth and capital growth are all positive and have statistically significant effects. Also, one can infer that the coefficient of the service industry’s labor growth rate is much higher than the coefficient of the service industry’s capital growth rate because labor included human capital.
Finally, a positive and significant deregulation coefficient was derived from the empirical analysis after taking the Reagan administration period (whose deregulation level before and after is highly distinguishable) as a dummy variable. This result is consistent with claims and many of the existing empirical studies asserting that mitigation of the regulatory level will achieve higher economic growth in the long run.
In Chapter 5, in conclusion, the achievement and the limitation of this study are thoroughly examined, while suggesting possible implications for the service development of the Korean economy based on empirical research results. -
Changes in the EU Regional Policy and their Policy Implications
The purpose of this study is to analyze the history of EU regional policy, to suggest some problems of cohesion policy and to learn lessons for Korean regional policy and Northeast Asian Economic Integration. This study too examin..
Eun Kyung Kim Date 2008.12.30
Economic integration, Political economyDownloadContentSummaryThe purpose of this study is to analyze the history of EU regional policy, to suggest some problems of cohesion policy and to learn lessons for Korean regional policy and Northeast Asian Economic Integration. This study too examines the changes of regional policy in the United Kingdom, France and Germany relative to that in the EU. EU regional policy as cohesion policy aims at reducing economic and social disparities between the Member States, because EU enlargement process, that might increase the regional disparities, could undermine cohesion of the Member States and enlargement of the EU. Experiences in the United Kingdom, France and Germany revealed that the strength of EU regional policy has weakened the political power of the Member States over their regions. EU regional policy exploits various instruments based on the regional characteristics and harmonize with decentralisation. Therefore, Korean government should improve the centralized and uniform regional balanced development policy in Korea. Concerning the Northeast Asian Economic Integration, it is necessary to discuss regional cohesion policy on the strength of the EU experiences. -
Ten Years after the Korean Crisis: Crisis, Adjustment and Long-run Economic Growth
Most observers would consider the 1997 Asian crisis as the biggest challenge in the impressive economic development of Korea. The Korean economy went through a significant transformation to overcome the unprecedented shocks of the..
Edited by Meral Karasulu et al. Date 2008.12.30
Economic reform, Financial crisisDownloadContentPreface
sessionxx I. THE KOREAN CRISIS AND ECONOMIC CHANGES
1. Korea Ten Years after the Crisis: Collateral and Reserve Accumulation / Michael P. Dooley, Peter Garber, and David Folkerts-Landau
Comments on “Korea Ten Years after the Crisis: Collateral and Reserve Accumulation”: Two Crises of International Economics / Naoyuki Yoshino
2. Inflation Targeting in Korea: Success, Good Luck or Bad Luck? / Yung Chul Park and Charles Wyplosz
Comments on “Inflation Targeting in Korea: Success, Good Luck or Bad Luck?” / Hans Genberg
3. Ten Years after the Crisis: Financial System Transition in Korea / Joon Ho Hahm
Comments on “Ten Years after the Crisis: Financial System Transition in Korea” / Shinji Takagi
4. Corporate Sector Restructuring in Korea: Status and Challenges / Stijn Claessens and Dongsoo Kang
Comments on “Corporate Sector Restructuring in Korea: Status and Challenges” / Youngjae Lim
sessionxx II. CHANGES LOOKING FORWARD: TOWARDS LONG-TERM STABLE ECONOMIC GROWTH
1. Achieving Long-Term Fiscal Sustainability in Korea / Tarhan Feyzioğlu, Michael Skaarup, and Murtaza Syed
Comments on “Achieving Long-Term Fiscal Sustainability in Korea”: Should We Be Concerned by Korea's Exposure to the International Interbank Market? / Robert N. McCauley
2. Household Debt in Korea and Macroeconomic Implications / Meral Karasulu and Jerald A. Schiff
Comments on “Household Debt in Korea and Macroeconomic Implications” / Chang Seok Oh
3. Productivity Growth and Structural Changes in Korean Economy before and after the Financial Crisis / Hak K. Pyo
Comments on “Productivity Growth and Structural Changes in Korean Economy before and after the Financial Crisis” / Chin Hee Hahn
sessionxx III. WHAT IS THE AGENDA FOR THE NEXT 10 YEARS?
1. Changes in Labor Quality among New College Graduates in Korea / Dae Il Kim
Comments on “Changes in Labor Quality among New College Graduates in Korea” / Yeongkwan Song
2. Trade Structure, FTAs, and Economic Growth: Implications for East Asia / Chan-Hyun Sohn and Hongshik Lee
Comments on “Trade Structure, FTAs, and Economic Growth: Implications for East Asia” / Hyun-Hoon Lee
3. Crisis, Adjustment, and Long-run Economic Growth in Korea / Noh Sun Kwark, Changyong Rhee and Doo Yong Yang
Comments on “Crisis, Adjustment, and Long-run Economic Growth in Korea” / Kwanho Shin
Seminar Program
List of Participants
List of KIEP PublicationsSummaryMost observers would consider the 1997 Asian crisis as the biggest challenge in the impressive economic development of Korea. The Korean economy went through a significant transformation to overcome the unprecedented shocks of the crisis. The resolution of the crisis acted as a catalyst to bring much needed structural change in the financial and corporate sectors. In the process Korea has adopted wide-ranging economic reforms, experienced substantial institutional change and significant improvements in its legal framework.(The rest is omitted) -
China and Korea in the World Economy: Common Opportunities and Challenges, Ten Years after the Asian Financial Crises
In Chapter I, Professor David Daokui Li at the Tsinghua University reviews the way in which China has coped with the Asian Financial Crisis in late 1990s and subsequently he evaluates that the current trend of globalization has st..
David Daokui Li et al. Date 2008.12.30
Economic relations, Economic cooperationDownloadContentForeword
Executive Summary
1. China in the Realm of the World Economy / David Daokui Li
2. Interpretation of China's Economic Comeback / Youngrok Cheong
3. Reflections on 10 Years of Financial Reform in China / Ping Xie
4. Higher Education Reform in China: Market Orientation and Institutional Response / Jun Zhang
5. The Structure of Trade between China and Korea / Yoocheul Song
6. China's Energy: Challenges and Strategies / Weidou Ni
7. FDI in China and Policy Consideration / Taotao Chen
8. The Korea-US Free Trade Agreement: Economy-wide Effects and Conclusions / Junkyu Lee
9. Why So Little Regional Financial Integration in Asia?: The Role of Liquidity / Doo-Yong Yang
10. Financial Integration in the Context of Northeast Asia / Hong-Rae Cho
List of ParticipantsSummaryIn Chapter I, Professor David Daokui Li at the Tsinghua University reviews the way in which China has coped with the Asian Financial Crisis in late 1990s and subsequently he evaluates that the current trend of globalization has still created generally unfavorable circumstances for developing countries. He concludes that both developed nations and developing countries collectively have to cooperate in improving the current international financial order and he finally emphasizes China's more positive role, as a swiftly emerging developing country, to build a new, more rational international economic order.
One of the most frequently asked questions about China is whether it can continue its high economic growth and will substitute the US in around 2020 as some international economic institutions predict. In Chapter II, to answer this question, Professor Youngrok Cheong at the Seoul National University identifies two most important China-specific factors, which most other countries do not have: the country's life cycle in the long history of China and its huge country size. Based on the innovative analysis of these two factors, his prediction is that China will sustain its speedy economic growth longer than what is generally expected. (The rest is omitted.) -
Analysis of Main Texts and Commitment Schedules of China's Previous FTA Service Agreement
In considering the volume of trade and size of bilateral foreign direct investment (FDI), obviously, China will be one of the most important free trade agreement (FTA) partners, which Korea will negotiate with some time in the fut..
Chang Kyu Lee et al. Date 2008.12.30
Trade policy, Free tradeDownloadContentSummaryIn considering the volume of trade and size of bilateral foreign direct investment (FDI), obviously, China will be one of the most important free trade agreement (FTA) partners, which Korea will negotiate with some time in the future. The Korea-China FTA has, therefore, been one of the key issues for both the policy-makers and researchers in Korea and a significant number of previous researches in this area have been accumulated. (The rest is omitted.)
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