IDEAS home Printed from https://ideas.repec.org/a/pal/imfecr/v65y2017i4d10.1057_s41308-017-0031-7.html
   My bibliography  Save this article

Trade, Reform, and Structural Transformation in South Korea

Author

Listed:
  • Caroline Betts

    (University of Southern California)

  • Rahul Giri

    (International Monetary Fund)

  • Rubina Verma

    (Instituto Tecnológico Autónomo de México)

Abstract

We develop a two-country, three-sector model to quantify the effects of Korean trade policies for structural change from 1963 through 2000. The model features non-homothetic preferences, Armington trade, proportional import tariffs and export subsidies, and is calibrated to match sectoral value added data on Korean production and trade. Korea’s tariff liberalization increased imports and trade, especially agricultural imports, accelerating de-agriculturalization and intensifying industrialization. Korean subsidy liberalization lowered exports and trade, especially industrial exports, attenuating industrialization. Thus, while individually powerful agents for structural change, Korea’s tariff and subsidy reforms offset each other. Subsidy reform dominated quantitatively; lower trade, higher agricultural and lower industrial employment shares, and slower industrialization were observed than in a counterfactual economy with no post-1963 policy reform.

Suggested Citation

  • Caroline Betts & Rahul Giri & Rubina Verma, 2017. "Trade, Reform, and Structural Transformation in South Korea," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(4), pages 745-791, November.
  • Handle: RePEc:pal:imfecr:v:65:y:2017:i:4:d:10.1057_s41308-017-0031-7
    DOI: 10.1057/s41308-017-0031-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41308-017-0031-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1057/s41308-017-0031-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    2. Margarida Duarte & Diego Restuccia, 2010. "The Role of the Structural Transformation in Aggregate Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 129-173.
    3. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    4. Zimmermann, Christian, 1997. "International real business cycles among heterogeneous countries," European Economic Review, Elsevier, vol. 41(2), pages 319-356, February.
    5. Kiminori Matsuyama, 2009. "Structural Change in an Interdependent World: A Global View of Manufacturing Decline," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 478-486, 04-05.
    6. Uy, Timothy & Yi, Kei-Mu & Zhang, Jing, 2013. "Structural change in an open economy," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 667-682.
    7. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    8. Verma, Rubina, 2012. "Can total factor productivity explain value added growth in services?," Journal of Development Economics, Elsevier, vol. 99(1), pages 163-177.
    9. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    10. Michelle Connolly & Kei-Mu Yi, 2015. "How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 188-221, October.
    11. Susan M. Collins & Won-Am Park, 1989. "Introduction to "External Debt and Macroeconomic Performance in South Korea"," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 3: Country Studies - Indonesia, Korea, Philippines, Turkey, pages 153-158, National Bureau of Economic Research, Inc.
    12. Susan M. Collins & Won-Am Park, 1989. "External Debt and Macroeconomic Performance in South Korea," NBER Chapters, in: Developing Country Debt and the World Economy, pages 121-140, National Bureau of Economic Research, Inc.
    13. Susan M. Collins & Won-Am Park, 1989. "II. External Debt and Macroeconomic Performance in South Korea," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 3: Country Studies - Indonesia, Korea, Philippines, Turkey, pages 151-152, National Bureau of Economic Research, Inc.
    14. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    15. Giri, Rahul, 2012. "Local costs of distribution, international trade costs and micro evidence on the law of one price," Journal of International Economics, Elsevier, vol. 86(1), pages 82-100.
    16. Namdoo Kim, 1996. "Measuring the Costs of Visible Protection in Korea," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 33, January.
    17. Murat Üngör, 2009. "De-industrialization of the Riches and the Rise of China," DEGIT Conference Papers c014_040, DEGIT, Dynamics, Economic Growth, and International Trade.
    18. Teignier, Marc, 2018. "The role of trade in structural transformation," Journal of Development Economics, Elsevier, vol. 130(C), pages 45-65.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Betts, Caroline & Giri, Rahul & Verma, Rubina, 2017. "Trade, Reform and Structural Change in South Korea," MPRA Paper 79072, University Library of Munich, Germany.
    2. Uy, Timothy & Yi, Kei-Mu & Zhang, Jing, 2013. "Structural change in an open economy," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 667-682.
    3. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    4. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    5. Murat Üngör, 2016. "Did the rising importance of services decelerate overall productivity improvement of Turkey during 2002–2007?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(3), pages 238-261, July.
    6. Sposi, Michael, 2019. "Evolving comparative advantage, sectoral linkages, and structural change," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 75-87.
    7. Li, Shang-ao & Gong, Liutang & Pan, Shan & Luo, Feng, 2020. "Wage and price differences, technology gap and labor flow dynamics," Economic Modelling, Elsevier, vol. 88(C), pages 211-222.
    8. Tomasz Swiecki, 2017. "Determinants of Structural Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 95-131, March.
    9. Teignier, Marc, 2018. "The role of trade in structural transformation," Journal of Development Economics, Elsevier, vol. 130(C), pages 45-65.
    10. Lifeng Zhang, 2015. "A Multi-sector Model of Public Expenditure and Growth," Journal of Economics, Springer, vol. 115(1), pages 73-93, May.
    11. Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2015. "Endowment structures, industrial dynamics, and economic growth," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 244-263.
    12. Sposi, Michael, 2015. "Trade barriers and the relative price of tradables," Journal of International Economics, Elsevier, vol. 96(2), pages 398-411.
    13. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.
    14. Liao, Junmin, 2020. "The rise of the service sector in China," China Economic Review, Elsevier, vol. 59(C).
    15. Jaime Alonso-Carrera & Giulia Felice & Xavier Raurich, 2018. "Inequality and Structural Change under Non-Linear Engels' Curve," UB Economics Working Papers 2018/374, Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics.
    16. Mariarosaria Comunale & Giulia Felice, 2019. "An empirical investigation of the relationship between trade and structural change," Bank of Lithuania Working Paper Series 62, Bank of Lithuania.
    17. Jiang, Zheng & Shi, Huimin, 2015. "Sectoral technological progress, migration barriers, and structural change in China," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 257-273.
    18. Trevor Tombe, 2012. "The Missing Food Problem," Working Papers tt0060, Wilfrid Laurier University, Department of Economics, revised 2012.
    19. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(3), pages 479-519, August.
    20. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.

    More about this item

    Keywords

    F13; F14; F43; O14; O41;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:imfecr:v:65:y:2017:i:4:d:10.1057_s41308-017-0031-7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.palgrave-journals.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.