Introduction & History


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



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The Adjustment Rate of the General Shared Tax and Fiscal Equalization across Local Governments: A Comparative Analysis with the Seoul Adjustment Grant

Man-Soo Joo (Hanyang University ERICA Campus)

Year 2023 / Vol 71 / No 4

This paper explores the impact of the local shared tax on fiscal equalization when the financial resources of the tax exceed the total amount of local governments’ financial shortages, as is the case in 2022. The paper also analyzes the fiscal equalization effect of the Seoul adjustment grant and compares it with that of the local shared tax to draw policy implications. The study finds that when the financial resources of the local shared tax are less than the total amount of local governments’ financial shortages, the fiscal capacity gap narrows without any change in the fiscal capacity ranking of local governments. However, when the financial resources exceed the total financial shortages, the fiscal capacities of subsidized governments are completely reversed, and the fiscal capacities of some subsidized governments become higher than those of non-subsidized governments. The paper also notes that while the Seoul adjustment grant does not lead to a systematic reversal of fiscal capacity among subsidized autonomous districts, it can lead to a reversal between subsidized and non-subsidized autonomous districts. Based on the results of these analyses, this paper derives a policy alternative for the local shared tax that can achieve fiscal equalization among local governments without causing any kind of reversal of fiscal capacity. 

Effects of the 52-hour Workweek Policy on Working Hours and Employment in Korea

Changhui Kang (Chung-Ang University) and Sangkon Park (Korea Culture & Tourism Institute)

Year 2023 / Vol 71 / No 4

This paper estimates the impact of the 52-hour workweek, which was implemented in July 2018, on working hours and employment size of regular workers. The results drawn from the Ministry of Employment and Labor’s “Survey on Labor Conditions by Employment Type” show that the 52-hour workweek reduced the average monthly overtime hours of workers by about 0.648 to 1.030 hours, and that the average monthly total working hours by about 0.723 to 1.557 hours. However, the total employment size of regular workers did not change significantly due to the 52-hour workweek. Analysis that subdivides the sample by workers’ characteristics suggests that the 52-hour workweek increased employment size in some worker groups (56 years old or older and below high school). In the group of mining and manufacturing industries and establishments with more than 300 employees, the 52-hour workweek did not have a significant impact on the employment size of regular workers. On the other hand, in the industry group other than mining and manufacturing, the 52-hour workweek increased the employment size of regular workers. 

Regional Heterogeneity and Productivity Gap across Regions in Korea: An Empirical Analysis Using Endogenous Growth Models

Seewon Kim (Chonnam National University) and Jieun Kim (Bank of Korea)

Year 2023 / Vol 71 / No 4

Available data indicates that the regional economies of Korea are heterogeneous in industry structure, R&D resources, and human capital. The regional heterogeneity implies that a substantial part of technological progress may be region-specific. Based on this argument, this study estimates a regional technology production function and evaluates the TFP gap across regions. First, the estimation result presents evidence in favor of R&D-based endogenous growth models against the neoclassical growth model. This implies that technological progress is proportional to an increase in R&D inputs. Second, we examine human capital models of the technology production function. The estimation result indicates that technological progress is associated with the level of human capital, but not a change in human capital, as predicted by the Romer model. The current result implies that regions such as Seoul, with more R&D resources and human capital, may have a comparative advantage in technological innovation. Consequently, the income gap between these regions and others may widen in the future. 


Does the Minimum Wage Affect Non-wage Workers?

Hyunbae Chun (Sogang University), Jungmin Lee (Seoul National University) and Donghan Shin (Korea Institute for Industrial Economics & Trade)

Year 2024 / Vol 40 / No 1

Non-wage workers, although not directly subject to the minimum wage laws, can be affected by a minimum wage increase, because labor markets are not segmented between wage and non-wage workers. Using 10-year longitudinal data on the universe of establishments in South Korea, we find that an increase in the minimum wage negatively affects the job growth of non-wage workers and that the largest channel for the effect is job destruction through business closing. The effect is larger in sectors that mainly consist of small businesses and low-skilled workers. 

Law and Economics of Artificial Intelligence: Optimal Liability Rules for Accident Losses Caused by Fully Autonomous Vehicles

Jeong-Yoo Kim (Kyung Hee University)

Year 2024 / Vol 40 / No 1

We examine the optimal liability rule in accidents involving fully autonomous vehicles. In cases where enforcing due activity is not feasible, it is socially optimal to apply the strict liability rule to the human operator determining the activity level and to apply the negligence rule to the manufacturer and the victim who select care levels under contributory or comparative negligence in the unilateral activity case. Under the joint and several liability rule, both the manufacturer and the victim exercise due care, contingent on regulating the manufacturer’s liability share sufficiently high, and the human operator assuming the remaining risks chooses the socially optimal activity level maximizing the social net benefit. Conversely, if due activity enforcement is possible, an alternative liability rule proves optimal. Under this rule, the human operator engages in efficient activity to comply with the activity standard, the manufacturer exercises efficient care to meet the care standard, and the victim assumes residual liability so as to be induced to take efficient care. Notably, this liability rule achieves the social optimum, even in bilateral activity cases where both the human operator and the victim engage in activity. Our results diverge from previous findings suggesting that achieving the social optimum involves using public sanctions, such as paying a fine to the state. 

Taxes, Payout Policy, and Share Prices: Evidence from DID Analysis Using Korea’s 2015–2017 Dividend Tax Cut

Jeong Hwan Lee (Hanyang University) and Young Lee (Hanyang University)

Year 2024 / Vol 40 / No 1

The Korean government temporarily lowered dividend tax rates for investors of firms that significantly increased dividend payments in 2015–2017. This study begins by examining whether qualifying firms on average increased dividends after controlling for other factors of dividends and how additional dividend payouts were financed. Unsurprisingly, we find that qualifying firms for the dividend tax cut increased dividends substantially without incurring a substitution effect between dividends and share repurchases. The main question of this study, which is the effect of the dividend tax cut on share prices, is investigated using the difference-in-differences analysis in the propensity score matched sample. We find that that the dividend tax cut increased the value of firms that took advantage of the tax cut by 22%, which is consistent with agency theory and the prevailing Korean discount in the financial market. 


Can the Serious Accidents Punishment Act Reduce Serious Accidents?

Jaeok Park (Yonsei University) and Sunku Hahn (Yonsei University)

Year 2024 / Vol 16 / No 4

It has been argued that in order to reduce serious industrial accidents in the workplace, the responsibility and punishment of employers and management executives need to be strengthened. In accordance with this argument, the Serious Accidents Punishment Act has been enacted and implemented. Using a game-theoretic analysis, this paper shows that simply strengthening the responsibility of employers and management executives does not guarantee a reduction in accidents and that the control that employers and management executives have over workers should be considered to analyze the impact of the Act on the occurrence of accidents and social welfare. 

Dissecting Interregional Job Mobility in Korea using Big Data from National Pension Service

Paul Jeon (, Jeonbuk National University) and Moon Jung Choi (Bank of Korea)

Year 2024 / Vol 16 / No 4

We investigate the pattern of job mobility across regions using the big data of National Pension Service. Our results from Logit regressions indicate that the probability of interregional job mobility is significantly higher for the young-aged, male, high income earners or those who employed in large or aged establishments. Also, the probability is higher in service than manufacturing sector, and in regions other than Seoul. Our findings imply that interregional job mobility exacerbates population decrease and brain drain in local area. To alleviate the population imbalance across regions, more decent jobs should be provided in local area. 

The Effects of Changes in the Local Economic and Housing Market on Small and Medium Enterprise Loans

Han Ik Jang (IBK Economic Research Institute) and Kwang Hae Won (Busan Techno Park)

Year 2024 / Vol 16 / No 4

This study dynamically examines the impact of macroeconomic and housing market changes on small and medium-sized enterprise (SME) loans in common (16 regions) or individual regions using the Bayesian Panel VARX model. According to the empirical analysis results, the average outcome for the 16 regions indicates that SME loans tend to increase when industrial production, consumer prices, housing prices, and mortgage loans for homes rise. However, when examining these trends in individual regions, it is challenging to observe consistent results across all areas. In other words, the possibility arises that in some regions, access to funding for SMEs through financial institutions may become difficult due to policies in industrial investment and housing market that do not consider regional characteristics. On the other hand, during the recent COVID-19 pandemic period, policy effects indirectly confirmed through SME loans show a clear response to the increase in market interest rates, but the response to cost increases due to rising prices appears somewhat weak from an economic perspective.