KEA RESEARCH

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

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KOREAN JOURNAL OF ECONOMIC STUDIES

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.

KOREAN ECONOMIC REVIEW

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.

KOREAN ECONOMIC FORUM

Top Income Shares in Korea: The Update, 1933-2016

Nak Nyeon Kim (Dongguk University)

Year 2018 / Vol 11 / No 1

This study updates Korea’s top income shares in the World Wealth andIncome Database until 2016. In the meantime, the national account statisticswere revised in accordance with the SNA in 2008 and income tax data havebecome more substantial, including information on tax exemptions. A newinterpolation method of income statistics by interval called GPC was proposed.Top income shares are updated to reflect these changes in data and method.Some interesting findings are as follows. Since the mid-1990s, the sharp rise inincome concentration has been somewhat moderated. What is noteworthy is thatinequality in earned income has been improved since 2010. This is because theincome of workers in the bottom 50% has risen faster than the top 10%. On theother hand, the concentration of income other than earned income, which ismainly composed of business income and financial income, is weaker thanbefore but continues to rise. As a result, the concentration of total incomestagnated in the first half of the 2010s, but recently turned to increase, becausethe increase in income concentration other than earned income has been fasterthan the fall in concentration of earned income.

Markets and Inequality

In Ho Lee (Seoul National University)

Year 2018 / Vol 11 / No 1

Economic inequality among members of an economy is an importantphenomenon. The importance of the phenomenon makes it necessary that weunderstand the source of the problem, not just the observation. This paperattempts to study the relationship between market competition and inequality.We analyze the mechanism through which market competition generatesinequality and then the positive effect and negative effect of inequality on theresource allocation in the economy. We also examine the role of losers ofmarket competition.

Ideological Tendency and the Social Capital: An International Comparison

Jin-Yeong Kim (Konkook University)

Year 2018 / Vol 11 / No 1

This paper derives ideological tendencies of OECD countries, and examinesthe relationship between the social capital and ideological tendency at thenational level. We characterize a person’s ideological tendency with fivecategories, namely communitarian, conservative, liberal, libertarian, centrismby applying the concept of the Nolan chart. From the World Value Survey wave5 data we derive nation’s ideological tendency and find that Korea has higherportion of communitarian than most of other OECD countries. We also find thatthe portion of libertarian, who has strongly supports economic freedom andpersonal freedom, is positively correlated with the trust index at the nationallevel. This finding implies that the accumulation of social capital be connectedwith people’s values on the economic and the personal freedom.