KEA RESEARCH

Introduction & History

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

Greetings

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Welcome to the Korean Economic Association.
The Korean Economic Association (KEA) is the representative economic society with the longest history in Korea. As of 2021, the KEA has over about 5,000 individual members, consisting of professors and researchers, and about 60 institutional members. In order to promote development of economics field and research activities in Korea, the KEA publishes academic journals, holds academic conferences and enhances exchanges with research institutes and related associations. The KEA provides a platform where members of all regions and generations can share academic knowledge and research outcomes and prosper in solidarity.

KOREAN JOURNAL OF ECONOMIC STUDIES

Effects of Marginal Firms on Productivity of Exporting Firms in Korea

Ki Hwan Yoo (Sogang University) and Jung Hur (Sogang University)

Year 2022 / Vol 70 / No 4

Motivated by the fact that the financial structure of export firms which have been known as leading firms in Korea is worsening due to the recent rise in domestic interest rates, this study examines effects of an increase in marginal firms in industries from 2006 to 2019 on productivity of exporting firms. As a result of the study, we found that the productivity of exporting firms decreased in an industry where the proportion of marginal firms increased. Also, as the proportions of marginal firms in industries increases, the entry rates as well as the exit rates of exporting firms slowed down and this trend is associated with the decline in the productivity of exporting firms. 

Being Born with a Wooden Spoon Cannot Guarantee a Golden Future?

Taehee Oh (Bank of Korea) and Jangyoun Lee (Incheon National University)

Year 2022 / Vol 70 / No 4

Since the mid-2010s, the so-called ‘Spoon Class Theory’ that parental wealth is a prerequisite for their children’s success has been widespread throughout Korean society. This study examines whether the actual labor market data supports this social perception by building the sample connecting parents and their children using the 1998-2021 Korea Labor and Income Panel Study. Our empirical results show a close positive association between parental financial wealth and their children’s labor market outcomes, such as job quality and wage growth path (the so-called ‘Wooden-spoon Discount Effect’). These results suggest that the government needs to minimize inequality of opportunities at the early stages of the youth labor market by repairing the broken social ladder to support young employees to climb up from the bottom to the top. 

Online Food Delivery Platform and Restaurant Sales: Evidence from a Local COVID-19 Outbreak

Sangwon Lee (Sogang University) and Hyunbae Chun (Sogang University)

Year 2022 / Vol 70 / No 4

We examine the impact of COVID-19 on restaurant sales depending on the use of online food delivery service (OFDS) platforms. Using data on credit card transactions of restaurants in Daegu, we find that OFDS restaurants could cover more than half of the lost sales driven by COVID-19. The sales loss covered by OFDS was larger in restaurants than in fast food and coffee shops. Our findings on the role of OFDS platforms in reducing the damage to restaurants provide policy implications for future pandemic response. 

KOREAN ECONOMIC REVIEW

Does the College Tuition Regulation in Korea Improve Social Welfare?

Dhongkyu Yoon (University of Washington) and Kyung-woo Lee (Yonsei University)

Year 2023 / Vol 39 / No 1

Since 2009, Korea’s college tuition regulation has reduced tuition by more than 20% in real terms. This paper examines the welfare effects of tuition regulation using a model of education choices depending on ability and wealth. College is costly but improves productivity and job prospects, whereas high school is free but has no benefits. If firms can observe workers’ abilities, tuition regulation can benefit most people because it makes college more affordable. However, if only workers can observe their ability, the welfare gain can be counteracted by the reduction in wages due to changes in education choices. In the simulated model, a 20% tuition reduction hurts approximately 90% of the population if only workers know their abilities. In contrast, it benefits more than 80% of the population if firms can also observe workers’ abilities. These findings suggest that tuition regulation may require complementary policies to facilitate the evaluation of workers’ abilities.  

A Study on the Causal Effects of Childbirth on Maternal Labor Supply in Korea

Cheolsung Park (Hanyang University) and Yuyeong Son (Korea Institute of Finance)

Year 2023 / Vol 39 / No 1

We estimate the causal effect of additional childbirth on mothers’ probability of working by using the two-stage least squares estimation method. Samples of mothers drawn from the 10%–20% Restricted Access Samples of the 2000, 2005, 2010, and 2015 Censuses are used. We use children’s gender composition as the instrumental variable for childbirth. We find that additional childbirth had significantly adverse effects on mothers’ probability to work up to 2010, but it is no longer likely to be the case. The ordinary least squares estimates still show a strong negative correlation between childbirth and maternal labor supply, which, our results indicate, is driven mainly by endogenous self-selection. We find that the labor supply of less-educated mothers is more adversely affected by childbirths.  

Regression Discontinuity with Integer Score and Non-Integer Cutoff

Myoung-Jae Lee (Korea University), Hyae-Chong Shim (Korea International Trade Association) and Sang Soo Park (Korea University)

Year 2023 / Vol 39 / No 1

In regression discontinuity (RD), the treatment is determined by a continuous score G crossing a cutoff c or not. However, often G is observed only as the ‘rounded-down integer S’ (e.g., birth year observed instead of birth time), and c is not an integer. In this case, the “cutoff sample” (i.e., the observations with S equal to the rounded-down integer of c) is discarded due to the ambiguity in G crossing c or not. We show that, first, if the usual RD estimators are used with the integer nature of S ignored, then a bias occurs, but it becomes zero if a slope symmetry condition holds or if c takes a certain “middle” value. Second, the distribution of the measurement error e G S = - can be specified and tested for, and if the distribution is accepted, then the cutoff sample can be used fruitfully. Third, two-step estimators and bootstrap inference are available in the literature, but a single-step ordinary least squares or instrumental variable estimator is enough. We also provide a simulation study and an empirical analysis for a dental support program based on age in South Korea. 

KOREAN ECONOMIC FORUM

Estimation of the Neutral Real Interest Rate with Household Credit Gap

Hyoung-Seok Oh (Bank of Korea) and Jiuk Choi (Citibank Korea Inc.)

Year 2023 / Vol 15 / No 4

The Laubach and Williams(2003) model has been widely used to estimate the neutral real interest rate(r*). However, crucial limitations have been continuously raised since the model cannot reflect the impact of financial conditions on the real economy. In Korea, household credit has increased significantly since the second half of 2014. Thus many economists worry about the possibility that the high level of household credit in Korea appears to contract private consumption and negatively affect long-term growth. Considering household credit conditions in Korea, this paper analyzed the neutral real interest rate using a model that explicitly reflects the effect of the household credit cycle on growth. We find that the neutral real interest rate level during the household credit cycle expansion period is higher than that estimated from the original Laubach and Williams(2003) method. Accordingly, the neutral real interest rate and monetary policy stance under excessive credit growth should be carefully estimated and assessed. 

Effects of the 52-work-hour Rule on the Workhours and Healthcare

Sojung Won (Korea Institution of Corporate Governance and Sustainability), Jihui Ahn (Ewha Womans University), Sieun Yi (Ewha Womans University) and Chaesil Lym (Ewha Womans University)

Year 2023 / Vol 15 / No 4

This study mainly examined the effect of the 52-hour workweek policy on workhour and healthcare using DID (Difference-in-differences) estimation by fixed-effect. We divided the sample each by sex, marriage, and child-rearing. The actual workhour reduction was observed in the total sample, married male, married male who does not rear child and unmarried female. Further, we analyzed the effect of workhour reduction on healthcare. While the total sample and married male showed less active healthcare, derived by decrease in health checkup, average monthly workout frequency increased when they raised a child. On contrary, unmarried female was indifferent in healthcare. 

Views on the State in Fiscal Policies

Dongsuk Oak (Incheon National University)

Year 2023 / Vol 15 / No 4

The problem of how to define the role of the government in public finance is the same as the view of the state(nation) that defines the reason for the existence of the state. There are various perspectives on the role of the government in the public finance, and this study classifies them according to the types of the view on the state. The views can be broadly divided into two categories: Based on the theory of state organism, the absolutist view of the state that the government should pursue values ​that are essentially different from the market; and the view of the state that the government and the market are compatible means that pursue essentially the same value based on the social contract theory. The theory of public finance reflects the latter view of the state, as it basically derives social welfare based on the utility of individuals. This can be further divided into three views: as a holistic plan for optimizing social welfare, the cost-benefit analysis that promotes partial improvement of social welfare, and the view as a service provider. Although it is difficult to give a clear answer on which fiscal and state views are desirable for fiscal management, this study argues that it is desirable to promote the evolutionary development of society while recognizing the government as a service provider.