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

Development of Weekly Regional Economic Indicator (WREI) and Regional Economic Snapshot

Won Suk Chung (Bank of Korea), Eunjeong Jo (Bank of Korea) and Sol Bin Lee (Bank of Korea)

Year 2024 / Vol 72 / No 3

This study developed a Weekly Regional Economic Indicator (WREI) using a Dynamic Factor Model (DFM) with mixed frequency to accurately assess regional economic conditions. WREI allows for regional comparisons due to its consistent composition and its weekly frequency, enhancing timeliness. WREI categorizes its constituent indicators into five categories (real activity, expectation, financials, households, labor market), enabling storytelling of key drivers of regional economic conditions through factor decomposition. Additionally, to provide a comprehensive overview of regional economic conditions, a Regional Economic Snapshot was developed, dividing the business cycle into 10 levels and visualizing it through heatmaps. 

A Study on Dating the Reference Cycle Using Components of Composite Coincident Index

Keun Yeong Lee (Sungkyunkwan University)

Year 2024 / Vol 72 / No 3

This study estimates the peaks and troughs of the reference cycle dates in Korea from January 2003 to December 2022 using the seven components of the coincident index and the multiple change-point model of Camacho et al.(2002). The estimation results show that the number of reference cycle dates estimated using the multiple change-point model (date-then-average approach) during the analysis period is four, which is the same as the number of reference cycle dates announced by Statistics Korea (average-then-date approach). However, when comparing the coincidence of the peaks and troughs, it is found that the peaks and troughs of the second cycle of the analysis period are similar, while the peaks and troughs of the third and fourth cycles are different. This large discrepancy in the timing of the turning points is likely due to differences in the two approaches, anomalous variables such as value of construction completed, and differences in trend estimation methods. 

Forcasting Young Childcare Services Based on Population and Household Structural Changes

Jihye Lee (Korea Institute for Health and Social Affairs) and Chulhee Lee (Seoul National University)

Year 2024 / Vol 72 / No 3

This study forecasts the future demand for the young childcare services by considering potential changes in the household structure, such as dual-income households, alongside demographic shifts. Despite the predicted decline in the young child population, the demand for public care services may not decrease proportionately due to the rise in dual-income families, coupled with an increased preference for public care based on household characteristics. The findings suggest that future childcare policies should account for not only the quantitative changes in the population but also the pace of household structure changes, the preferences for types of care based on household characteristics, and the demand for quality in terms of time and costs. 

KOREAN ECONOMIC REVIEW

Effects of Initial Labor Market Conditions on Job Polarization: Evidence from South Korea

Youngsoon Kwon (Yonsei University), Myungkyu Shim (Yonsei University) and Hee-Seung Yang (Yonsei University)

Year 2024 / Vol 40 / No 2

This paper investigates the extent to which initial conditions in the labor market influence the progress of job polarization in Korea. In particular, we compare the following two competing hypotheses: a specialization hypothesis and an inter-industry wage differentials hypothesis. Our findings indicate that job polarization is pronounced in industries that have historically relied on routine tasks and have experienced a significant increase in ICT capital intensity between 2000 and 2019. By contrast, initial inter-industry wage differentials are not associated with job polarization in Korea during the same period.  

Spatial Panel Analysis of Ambient Air Pollution in Korea

Hyungsun Yim (University of Illinois at Urbana-Champaign) and Byeongseon Seo (Korea University)

Year 2024 / Vol 40 / No 2

This study investigates the underlying drivers behind air quality pollution in Korea by using spatial panel analysis. Specifically, we consider the local and transboundary effects of economic, climatic, and geographical factors leading to the heightened presence of fine particulate matter (PM2.5). Furthermore, our study expands its scope beyond national boundaries to include an evaluation of external sources that contribute to elevated pollution levels within Korea. Consequently, this research adopts a multilevel approach to assess the within and outer factors of air pollution in Korea. Our analysis is based on a spatial panel dataset spanning all districts of Korea by incorporating satellite-based air pollution, meteorological, and geographic information for 2010–2016. Empirical results indicate that air pollution degrades the air quality in other cities and the overall national ambient pollution as well. Moreover, empirical results from the general nesting spatial (GNS) specification of spatial interaction suggest that the impacts of economic and climatic factors on air pollution are substantial. In addition, our analysis incorporates cross-country spatial effects of air pollution, which reveals a significant transboundary spillover effect. Furthermore, a deeper analysis of spatial heterogeneity underscores intriguing disparities in the impact estimates. Changes in domestic and foreign factors in the northwest region are linked to a more pronounced diffusion of pollution to multiple cities in contrast to the impacts originating from the southeast.  

How Much Do Prices Respond to Demand and Supply Shocks?

Seong-Hoon Kim (Yonsei University -- Mirae) and Seongman Moon (Jeonbuk National University)

Year 2024 / Vol 40 / No 2

This paper presents a theoretical examination of price responses to movements in demand and supply where firms face either unwanted inventories or stockouts in each period. The response mechanism consists of two complementary motives that arise when operating under uncertain business environments. To an increase in demand, a firm has a motive to lower its price reflecting lower effective marginal costs but also has another motive to raise its price to rebalance expected marginal revenues associated with two distinct demand states, unwanted inventories and stockouts. These two motives cancel out each other at optimum, resulting in a limited response of prices to demand shocks. To a cost-push shock, the firm has a motive to raise its price reflecting higher effective marginal costs for a given output level and is further prompted to raise prices reflecting a higher expected value of unit inventory. The two motives push prices up in the same direction, resulting in a large response of prices to supply shocks.  

KOREAN ECONOMIC FORUM

Estimation of Potential GDP in Korea Using the Stochastic Frontier Production Approach

Hak K. Pyo (Seoul National University), Hyunbae Chun (Sogang University) and Keun Hee Rhee (Seoul National University)

Year 2024 / Vol 17 / No 3

This study uses a stochastic frontier production model to estimate Korea’s potential GDP. The model estimates time-varying technical inefficiency for each of the 38 industries from 1995 to 2022. After combining the minimum technical inefficiency of each industry with industry-level potential labor and capital, we calculate the industry-level potential GDP and aggregate them to obtain the economy-level potential GDP. The results suggest that actual GDP below potential GDP is primarily due to the industry’s inability to minimize technological inefficiency rather than suboptimal labor and capital inputs. In particular, since 2010, a decline in capital utilization and an increase in technical inefficiency have expanded the GDP gap, causing the actual growth rate to fall about 25% faster than the potential growth rate. The study distinguishes itself from previous research by reflecting changes in technical inefficiency at the industry level, thus capturing the structural characteristics of Korea’s export-driven industrial sector. It suggests that policies enhancing potential growth rates and reducing the recent GDP gap are needed to recover the midto long-term growth rate.

Effects of Labor Market Rigidity on Foreign Market Entry by Korean Manufacturing Firms

Yena Song (Sungkyunkwan University), Soomin Han (Korea Small Business Institute) and Sunghyun Kim (Sungkyunkwan University)

Year 2024 / Vol 17 / No 3

This study identifies the determinants of Korean firms’ decision on foreign market entry by focusing on the role of labor market rigidity using the Korean manufacturing sector data from 2007 to 2017. We use the data from HCCP survey by the KRIVET(Korea Research Institute for Vocational Education and Training). Empirical results show that the strength of labor union has significant effects on the probability of overseas expansion. The firm-specific analysis confirms that the impact of labor union is greater for labor-intensive firms. The regression analysis by investment destination reveals that overseas expansion towards Asian countries is largely affected by labor costs and the number of union members, but for expansion into North America is not affected by labor market rigidity. For the labor-management relations within company, the estimation results show that the more confrontational the labor-management relations, the higher the possibility of overseas expansion. Lastly, we find that overseas expansion increases in companies with decreasing demand for their main products or innovative companies that develop new products. All these results indicate that labor market rigidity affects firms’ decision on overseas expansion, and the government should consider these effects when designing reshoring policies.

News

Year 2024 / Vol 17 / No 3

1. 한국경제포럼 한국연구재단 학술지 계속평가 ‘등재학술지’ 본 학회 한국경제포럼은 지난 2016년 3월 25일 정관 개정을 통해 정식 편집위원회가 구성되었으며, 그동안 여러 편집위원님들과 회원님들의 기여에 힘입어 2021년도에 한국 연구재단 ‘등재학술지’로 선정되었습니다. 한국경제포럼은 이론적·계량적 모형을 통한 정책시사점 도출 뿐만 아니라, 한국경제에 대한 현실성 있는 정책방안을 제시하는 논문을 지향합니다. 우리 경제의 제반 문제들을 올바르게 이해하고, 그 해법을 모색하는 데 기여 할 수 있는 정책방안을 제시하는 논문을 지향합니다. 앞으로도 한국경제포럼을 독보적 인 한국경제 정책연구 학술지로 발전시켜 한국경제에 대한 정책시사점이 많은 영향력 있는 논문들을 게재할 수 있도록 회원님들의 많은 투고와 관심을 요청 드립니다. 한국경제포럼에 게재 된 모든 논문은 http://www.kea.ne.kr/publication/kef/article 에서 무료로 다운 받을 수 있습니다.  2. The Korean Economic Review (KER) 본 학회에서 발간하는 영문학술지인 KER은 한국연구재단 등재학술지이며, SSCI 및 Scopus 등재학술지입니다. 앞으로도 KER이 국제학술지로 더욱더 발전해 나갈 수 있도록 회원님들의 많은 관심과 KER에 게재 된 논문에 대한 많은 인용 및 투고를 부탁드립니다. KER에 게재 된 모든 논문은 http://www.kea.ne.kr/publication/ker/article 또는 http://www.kereview.or.kr/main/ 에서 무료로 다운 받을 수 있습니다.   3. KER RePEc (Research Papers in Economics) 사이트 업로드 KER 창간호부터 최근호까지 게재된 모든 논문들을 경제 논문 데이터베이스인 RePEc.org 에서 확인할 수 있습니다. KER 관련 사이트는 아래와 같습니다. 회원님들의 많은 인용 및 관심을 부탁드립니다. http://econpapers.repec.org/article/keakeappr/