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



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Cognitive Ability and Economic Outcomes of North Korean Refugees

Byung-Yeon Kim (Seoul National University) and Jungmin Lee (Seoul National University)

Year 2018 / Vol 66 / No 1

Cognitive ability is one of the most basic components for productivity. It alsoplays important roles not only in workplaces but also in various domains overone’s lifetime. In this study, we measure the level of cognitive ability for NorthKorean refugees, which is almost unknown in the literature. Collecting thedata from 300 refugees, we examine the determinants for their cognitiveability, measured by the Raven’s progressive matrices test, and investigate theeffects of cognitive ability on their economic outcomes in South as well asNorth Korea. We find that there is a substantial gap in cognitive abilitybetween North Korean refugees and native-born South Koreans. Aninternational comparison reveals that North Korean refugees’ average cognitiveability is as low as those in other less developed countries. Finally, we findthat cognitive ability is positively correlated with higher social status in NorthKorea as well as economic assimilation after they settle down in South Korea.

Adam Smith's Theory of Happiness: An Origin of Happiness Economics and Civil Economy

Kwangsu Kim (Sungkyunkwan University)

Year 2018 / Vol 66 / No 1

This paper aims to address Adam Smith’s frontier view of happiness andeconomics, which has recently been raised since the so-called Easterlin’sParadox. At the outset, we take a historical look at several major theories ofhappiness in philosophy and psychology, from which two theories of happinesseconomics have arisen. Next we examine, in detail, Smith's approach tohappiness in light of his moral philosophy, and cast some light on his opinionthat true happiness consists in agreeing with sympathetic sentiments ofimpartial spectators. We then suggest that, while in his moral philosophy ahybrid (subjective and objective) approach to happiness is taken as a whole,his basic theory of happiness is largely in line with the tradition of Aristotelianobjective list theory. We conclude that Smith’s view of happiness in moralphilosophy is a precursor of modern civil humanism and happiness economics,in that the value of reciprocity among agents is regarded, above all, to beimportant in socio-economic transactions.

A Study on the Age Effects and the Cohort Effects of Income Distribution in Korea

Jong In Yoon (Baekseok University)

Year 2018 / Vol 66 / No 1

We investigate the age effects and the cohort effects of income distributionin Korea during 1990~2015. Our main results are as follows. First, we obtaina secular rise of inequality based on the before-tax income but a moderate riseof that based on after-tax income. These results mean that the governmentpolicy has been effective. Second, age-income level effects, age-incomedistribution effects, and cohort-income level effects are likely to be significantbut cohort-income distribution effect is not. Third, Theil index decompositionsby age show that between-age group effects have grown faster than within-agegroup effects. Recently, between-age group effects contribute to the overallincome distribution more than within-age group effects. We can obtainmeaningful implications about explaining the past movement of incomedistribution and predicting inequality of younger generations and older ones inthe future.


The Open-Economy Trilemma in the Long Run

Barry Eichengreen (University of California)

Year 2018 / Vol 34 / No 1

This paper extends the literature on the open-economy trilemma by developing aconsistent set of indicators of exchange rate stability, monetary autonomy and capitalaccountopenness for a large sample of countries, starting in 1890 and extending into thesecond decade of the 21st century. Analysis of these indicators confirms stylized facts in theliterature on international monetary and financial history and is consistent with thetrilemma paradigm.

International Fiscal Spillovers: A Review Essay

Michael B. Devereux (University of British Columbia)

Year 2018 / Vol 34 / No 1

This paper provides a review of the empirical literature on fiscal multipliers andinternational fiscal spillovers. We discuss the various empirical methodologies employed inmeasuring spillovers, and the degree to which estimated spillovers depend on the state of thebusiness cycle, the stance of monetary policy, the exchange rate regime, and other factors. Inan environment where monetary policy is constrained by the zero bound, both fiscalmultipliers and international fiscal spillovers are likely to be much larger than in normaltimes. In general, this prediction is supported in the empirical literature.

A Model of Endogenous Party Membership and Platforms with Opportunistic Politicians

Kwang-ho Kim (Hanyang University)

Year 2018 / Vol 34 / No 1

We model endogenous party membership choice and party platform formation whenparty activists differ not only in their policy preference but also in the intensity with whichthey pursue policy issues vis-a-vis the spoils from electoral victories. We provide existenceresults for equilibria in which (i) party activists choose their party affiliation with correctanticipation of the choices by others and (ii) the resulting party platforms are consistent withthe affiliation choice. This model offers an explanation for the overlaps in ideology betweenpolitical parties. It also provides insights into the internal composition of political partieswith different sizes.


Mid-term and Long-term Fiscal Policy Direction in Korea

Sung Tai Kim (Cheongju University)

Year 2018 / Vol 10 / No 4

This paper suggests the mid-tern and long-term direction of fiscal policy inKorea recognizing that the new Korean government is likely to pursue fiscalpolicy carelessly in the future. Up to now the Korean government’s fiscal policieshave been successful in performing a variety of policy measures to solve thenational policy agenda. The Korean government’s fiscal policy has been based onthe balanced budget so that she has been able to maintain fiscal healthiness.However, volatile changes in economic and fiscal environment such as rapidaging and low fertility rate, a decrease in potential economic growth rate, andincome polarization make the Korean government keep fiscal healthiness. Tosolve these problems we should consider the future generation as well as currentgeneration in setting up the direction of fiscal policy in the future. The currentgeneration should pursue the structural reform in government expenditurespending and tax reform focusing on tax increase such as Value-Added Taxincrease.

Opening of Korean Legal Markets: Issues and Policy Suggestions

Duol Kim (Myongji University)

Year 2018 / Vol 10 / No 4

In March, 2017, the Korean government opened Korean legal markets asplanned. Unlike prevailing worries, however, foreign law firms have not rushedinto the Korean markets, and it is not likely to happen in the near future either.For understanding this phenomenon, I reviewed Korean legal markets and worldenvironments, and then evaluated the market-opening policies. The results areas followed. First, Korean legal markets has grown rapidly for last two decades,and many foreign law firms want to enter into Korean markets. Second, thereason why foreign law firms have not rushed into Korean markets despite theirinterests is the government regulations including limits on organizing jointventures, and so on. Third, restricting entrance of foreign law firms shouldallow more profits to Korean law firms and contribute to their growth, but it alsoharm on welfare of Korean people by reducing available choices. Fourth,considering that market opening basically increases people’s welfare and thatprotection policy should be a policy tool for improving competitiveness ofdomestic producers, current regulations on legal markets against foreign firmsneed fundamental changes. Fifth, for improving competitiveness of Korean lawfirms and lawyers, current government policies on legal profession which aim toraise lawyers’ income by reducing their supply should be reformed.

Changes in the Environment of Global Infrastructure Investment and Implications for the Korean Financial Sector

Yoonsok Lee (Korea Institute of Finance) and Mansoo Jee (Korea Institute of Finance)

Year 2018 / Vol 10 / No 4

Both the level of investment and degree of private participation in theinfrastructure sector is rapidly expanding globally. Taking this into account, thispaper suggests strategies for the Korean financial sector and policyrecommendations for the Korean government to cope with this new environment.We provide a brief overview of global infrastructure investment andPPP(public-private partnership) involvement by region, sector and project type.We also outline the participation by Korean financial companies in overseasinfrastructure investment and provide a SWOT analysis of Korean financialcompanies.