KEA RESEARCH

Introduction & History

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The Korean Economic Association was launched in Pusan on November, 30, 1952.

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Since its foundation in 1952, the Korean Economic Association has been constantly evolving and establishing a position as Korea's prestigious economics representative society.

KOREAN JOURNAL OF ECONOMIC STUDIES

Measuring Relative Productivity of Team Production: Evidence from Hospital Service Industry

Myung-Joong Kwon (Yonsei University Wonju Campus), Mikyung Yun (The Catholic University of Korea) and Sang-Hyuk Cho (Yonsei University)

Year 2018 / Vol 66 / No 4

 This paper investigates the problem of measuring productivity of team production. A team production function is developed, and a new, relative productivity index that not only enables measuring but also comparing the productivity of each cooperating team, is devised. Utilizing this innovative method to measure relative productivity of 86 hospitals with more than 100 beds, the following empirical results are obtained. Estimation of the team production function shows that: ① coefficients for labor is significantly different from the ordinary production function; ② team production function displays sub additivity, confirming that there is synergy effect; and ③ demand constraint, technology, and hospital heterogeneity all affect productivity. Analysis of the relative productivity index shows that: ① it is possible to compare individual labor and team productivities of individual hospitals; ② O-ring effect is relatively low in nurses-laboratory staff team cooperation while it is high in doctor-nurse team cooperation; ③ synergy effect is similar across cooperation between various teams, except those between doctor-office staff and nurse-laboratory staff; ④ synergy effect is likely to be greater, the greater the productivity differences between participants in a team. These results show that for greater accuracy of measurement, the relative productivity method is essential and that such a method also widens the scope of productivity analysis. This study thus fills the gap in team production and team productivity measurement literature. 

Dynamics of Firm Investment on Training: An Agent-Based Model Approach

Jung-Seung Yang (Korea Research Institute for Vocational Education & Training)

Year 2018 / Vol 66 / No 4

This study investigated the relationship between companies’ investment on training and individual workers’ efforts by an agent-based model. We simulated a virtual society where heterogeneous companies and workers carried out production. The results showed that initial proportion of companies investing on training was negatively related with the return on training investment and investing on training was not good strategy in most cases. The faster learning speed was, the worse investing on training was and cut-down on training cost increased the total production in the economy and the proportion of training-investing companies. And, if the government supports a part of the training cost of companies, the total production of the economy and the proportion of training-investing companies also increased. Compared to the case of cut-down on training cost, it was found that the government’s support was more efficient. On the other hand, expenditure of labor effort was kept stable. 

The Impact of U.S. Economy Policy Uncertainty on Korean Economic Variables

Nam Hyun Kim Korea Deposit Insurance Corporation)

Year 2018 / Vol 66 / No 4

 This paper focuses on analyzing the influences of Economic Policy Uncertainty (EPU) in the U.S. on the Korean economy. In particular, the Korean economy is influenced by a foreign EPU through changes in the foreign economy. I reflect this using a block exogenous VAR model. In financial markets, the empirical results after the financial market fully opened since the Asian financial crisis show that a positive shock to the EPU decreases the Korean and U.S. stock prices and interest rates while increases the won/dollar exchange rate in financial markets. When using other EPUs, the EPU about “Monetary Policy” shock had the strongest impact on the Korean financial market. According to empirical results of the macroeconomic variables, an EPU shock decreases the U.S. and Korean industrial gap and short-term interest rate, however industrial gaps start recovering slowly after three months. After the financial market fully opened, responses in industrial production gaps were smaller and faster than those over the entire period and showed a faster recovery speed. 

KOREAN ECONOMIC REVIEW

CO2 Emissions, Foreign Direct Investments, Energy Consumption, and GDP in Developing Countries: A More Comprehensive Study using Panel Vector Error Correction Model

Suyi Kim (Hongik University)

Year 2019 / Vol 35 / No 1

This paper examines the causal relationships among carbon dioxide (CO2) emissions,energy consumption, gross domestic product (GDP), and foreign direct investments (FDI)in 57 developing countries from 1980 to 2013. The results of the analysis based on panelvector error correction model (VECM) indicate no direct short-run causality exists fromFDI to CO2 emissions. These results are also confirmed by regional analysis, wherein thedeveloping countries are divided into three regions. In the long run, a cointegratedrelationship is found among CO2 emissions, energy consumption, GDP, and FDI, whichsupports the environmental Kuznets curve hypothesis. However, the long-run elasticity ofFDI on CO2 emissions is very small even though it is statistically significant. These results donot support the pollution haven hypothesis of CO2 emissions through inward FDI indeveloping countries. 

Reassessing the Inflows and Outflows of Unemployment in Korea

Jong-Suk Han (Korea Institute of Public Finance) and Jiwoon Kim (Korea Development Institute)

Year 2019 / Vol 35 / No 1

Using data from the Economically Active Population Survey from 1986 to 2014, wecomprehensively examine Korean unemployment dynamics using worker flows: inflow ratesand outflow rates. We estimate both flow rates by carefully correcting for time aggregationbias, and quantify the contribution of changes in each flow rate to unemploymentvariability through steady-state and non-steady-state decompositions. Our baseline analysisreports the average of inflow rates as 1.6% and that of outflow rates as 48%. Moreover,despite the small size of the inflow rates, inflows account for 90% of unemploymentvariability. The significant contribution of inflows to unemployment fluctuation stillappears even under a three-state model that includes inactive workers and heterogeneousflow rates by reasons for unemployment. The large contribution of inflows tounemployment changes despite high outflow rates is a unique feature of the Korean labormarket not seen in previous studies of OECD countries. 

Optimal Partial and Full Disability Insurance with an Application to Korea

Kyung-woo Lee (Yonsei University)

Year 2019 / Vol 35 / No 1

In this paper, I investigate the optimal disability insurance (DI) when partial and fulldisability are privately observed over the life cycle. I demonstrate that in the social optimum,partially disabled agents are induced to supply labor despite substantial government transfersunless labor supply is relatively elastic and their productivity is significantly reduced. I thenapply the framework to quantitatively evaluate Korea’s DI programs, which include partialand full disability benefits. In the calibrated model, I find that welfare gains from replacingKorea’s DI programs with the corresponding optimal system amount to a 1.17% increase inconsumption. Such a reform significantly raises the utility of both types of disabled agents atrelatively small utility costs of able agents. Equity gains from this redistribution account for73.4% of the total welfare gains, whereas efficiency gains from the optimal allocationaccount for 26.6%. 

KOREAN ECONOMIC FORUM

The Role of Bank of Korea Revisited

In June Kim Seoul National University)

Year 2019 / Vol 11 / No 4

economy and accumulation of domestic structural problems. At this juncture, theBank of Korea should aim at achieving not only price stability but also financialstability. Financial stability can be obtained by preventing occurrence of financialsystemic risks. Three major financial risks in Korea are those; boom bust cyclein real estate markets, a large amount of abrupt capital flows due to thedifferentials between domestic and international interest rates, and risks involvedin increased connectedness among financial institutes and increased share ofnon-bank financial institutes. The Bank of Korea should put major emphases onachieving financial stability, watching and analyzing the developments of realestimate markets, flows of capital and the speed of increasing household debts,when it carries out monetary policies.For the financial stability, the optimal combinations of monetary andmacro-prudential policies are required. The monetary policies have influences onthe macro-prudential policies and vice versa. In Korea, however, the Bank ofKorea is in charge of monetary policies while the financial authorities areresponsible for macro-prudential policies. To resolve the current problems, it isdesirable to establish tentatively named “Financial Stability Board” consisting ofMinistry of Strategy and Finance, Bank of Korea, and financial authorities.Financial Stability Board can take full responsibilities for macro-prudentialpolicies and making important decisions concerning financial stability.The Bank of Korea, however, should remember the first line of responsibilityfor financial stability falls upon the monetary policies of the Bank of Korea.Independence of the Bank of Korea only can be secured when the Bank of Koreafulfills its responsibility for price and financial stability successfully.

Total Factor Productivity and Tax Policy

Hag-Soo Kim (Korea Institute of Public Finance)

Year 2019 / Vol 11 / No 4

As the economy matures, Korea needs to make more policy efforts to achieveadditional innovative growth. This study reviewed the importance of theimprovement of TFP, which is the main growth driver of innovation-driveneconomies. It also reviewed that Korea did not improve it’s TFP since 2011. Italso analyzed the impact of major tax policies on the growth rate of TFP usingpanel data from OECD countries over the period of 1991~ 2016. According to theempirical analyses, the highest corporate tax rate that the current governmenthas raised right after its inauguration is expected to have a negative impact onimproving TFP. However, the tax reform plan of enhancing property taxcurrently being pushed will not negatively affect the overall productivityimprovement.

The Political Economy in the Three East Asian Countries and International Development Cooperation

Yeon Seung Chung (Korea Lap. of Developing Countries) and Sunju Kwon (Changwon National University)

Year 2019 / Vol 11 / No 4

We investigate the historic origins of the differences on the political economyof Japan, Taiwan, and Korea which have been the most successful in economicdevelopment since the World War II. Following the literature our research isfocused on the independence of bureaucracy and the relationship between thestate and the private capital.Then we apply the analyses of the political economy of the three East Asiancountries to the sub-Saharan African countries. While there are a few countriesthat succeeded to maintain the independence of bureaucracy, most countries donot have a basis for co-operative relationships between the state and the privatecapital due to not enough private capital. To accumulate private capital for thedevelopment, the sub-Saharan African countries may adopt first, theTaiwan-style policies providing the competitive eco-system for private firms,after waiting the realization of some firms’ growth, then the Korean-style policyof direct support to the proven firms.