Introduction & History

The Korean Economic Association was launched in Pusan on November, 30, 1952.
KOREAN JOURNAL OF ECONOMIC STUDIES
Year 2024 / Vol 72 / No 4
This study quantitatively analyzes the intergenerational welfare impacts of policy alternatives with different cost-sharing structures to respond to the deteriorating health insurance financing caused by demographic changes due to low fertility and aging, using a heterogeneous agent overlapping generation general equilibrium model. The analysis shows that due to the rapidly rising nature of health care costs in the later stage of life, policies that increase out-of-pocket spending will cause significant harm to the welfare of the current older generation. In contrast, the policy scenario with additional taxation based on labor income results in a significant increase in welfare for the current generation and a significant decrease in welfare for future generations. This is because by the 2060s, when the additional fiscal burden increases dramatically due to the significant increase in the old-age dependency ratio, the current generation will have largely retired from the labor market, shifting most of the additional tax burden to future generations. For the policy scenario that uses consumption tax to address the additional tax burden, the change in intergenerational welfare is more uniform than for the other scenarios. This is because the life cycle of consumption, which is the tax base of consumption tax, remains flat over its entire life compared to the life cycle of labor supply.
Estimating the Taylor Rule using Sectoral Inflation
Year 2024 / Vol 72 / No 4
This paper estimates the central bank’s Taylor rule using data from the period after the adoption of the inflation targeting regime up to the most recent period. The key differences from existing studies are as follows: First, the analysis period is divided into three sub-periods to consider changes in the monetary policy operating framework. Second, the Taylor rule is estimated not only using CPI inflation, but also utilizing sectoral inflation rates. This allows us to examine the extent to which the central bank has been placing weights on sectoral inflation rates. The analysis results show that the central bank’s policy responses have varied depending on the monetary policy operating framework. In the early period, the central bank responded more actively to the output gap than the inflation gap. However, in the medium and later periods, the central bank paid closer attention to the inflation gap. The consideration of sectoral inflation also differed across the sub-periods. The results remained consistent across various robustness checks. Additionally, the analysis identified an asymmetry in the central bank’s policy responses when inflation pressures were positive versus negative. These findings are expected to contribute to a better understanding of the central bank’s monetary policy behavior.
Year 2024 / Vol 72 / No 4
This study analyzed the impact of a price ceiling system on apartment prices in Seoul and three Gyeonggi-do cities using the difference-in-differences method. The sample is divided into speculative and non-speculative areas to account for other policies and regional variations in the policy effect. Results showed that the policy reduced prices in speculative areas post-announcement, with no significant effect in non-speculative areas, confirming heterogeneous policy effects across areas. A dynamic analysis showed the policy's diminishing negative impact on housing prices over time. Additionally, deregulation of the policy increased prices, particularly in speculative areas, exacerbating price imbalances. These findings suggest that the price ceiling system may have unintended consequences, requiring careful implementation to meet policy goals.
KOREAN ECONOMIC REVIEW
Automation & the Future of Work: When Artificial Intelligence Meets Schumpeterian Innovators
Year 2025 / Vol 41 / No 1
Building on the task-based production models augmented with Schumpeterian innovation, we develop a theoretical framework to analyze the labor market impacts of the introduction of artificial intelligence (AI) to the R&D sector. Innovators allocate scientists’ time between automation of existing tasks and creation of new varieties of tasks to maximize their profits. The introduction of AI or general-purpose R&D technologies expands the frontier of the automation possibility set to encompass all existing tasks. In this milieu, task innovators prioritize the automation of the most profitable tasks – which depends on taskspecific wage, market size, capital productivity, and the innovator’s bargaining power. Therefore, unlike the previous waves of automation, new “AI” based automation technologies can pose a significant threat to high-skilled workers. Moreover, the advent of new R&D technologies raises the cost of creating new tasks and slows down the obsolescence of existing ones. Combined with faster task automation, ironically, the dynamics of the R&D sector may eventually decelerate widening income inequality among workers.
Multi-class Shares around the World: Role of Institutional Investors
Year 2025 / Vol 41 / No 1
This study examines multi-class share structures around the world. We use a comprehensive sample of publicly listed firms in 45 countries over the period 2001–2016 and find that institutional investors exhibit strong aversion toward multi-class firms, penalizing them through a valuation discount. The presence of institutional investors correlates with a higher likelihood of share-class unification. These effects are stronger for local (particularly in the US) and actively managed investors. Overall, our research highlights the role of institutional investors in the current debate on banning multi-class stocks from global stock indices.
Year 2025 / Vol 41 / No 1
In this study, we estimate the elasticity of the marginal utility of income using nationally representative household survey data from South Korea, following the direct measurement approach of Layard et al. (2008). Our findings suggest that the income elasticity of marginal utility for the broader population is 1.49 and remains stable over time. Moreover, we explore potential heterogeneity in the income elasticity of marginal utility among individuals. Statistically significant differences in this elasticity are observed across subgroups defined by various demographic and socioeconomic characteristics, including age, marital status, employment status, health status, educational attainment, and net asset positions.
KOREAN ECONOMIC FORUM
The Impact of the North Korean Threat on the Korean Economy
Year 2025 / Vol 17 / No 4
This study examines the impact of North Korea-related risks, an exogenous variable, on the domestic economy using the TVP-VAR model with exogenous variables. North Korea-related risk is using the Korea Geopolitical Risk Index, developed by Caldara and Iacoviello (2022), based on foreign news articles. The empirical analysis reveals that an increase in North Korea-related risks leads to rises in the call rate, won/dollar exchange rate, producer prices, and consumer prices, while industrial production declines. The negative impact on the domestic economy caused by the increasing threat from North Korea is not limited to specific periods but consistently persists at a certain level. Recently, the scope and intensity of these negative effects have been showing a trend of expansion. Furthermore, since June 2021, the increase in North Korea-related risks has caused a more significant reduction in manufacturing production for small and medium-sized enterprises (SMEs) than for large enterprises. In addition, using the Geopolitical Risk Index for South Korea developed by Jung, Lee, and Lee (2021) based on domestic news articles alongside the index by Caldara and Iacoviello (2022), it is observed that the volatility of North Korean risk calculated using foreign information is greater than that derived from domestic sources. This suggests that domestic responses to North Korean threats are somewhat less sensitive compared to those abroad. Finally, the increase in North Korea-related risks initially exerts negative impacts on domestic financial markets, followed by negative impacts on real markets such as industrial production.
Year 2025 / Vol 17 / No 4
The study evaluates the impact of criminal prosecution of controlling shareholders on the performance and investment of Korean business conglomerates (chaebol). Using the difference-in-differences approach by Callaway and Sant’Anna (2021) to address heterogeneous treatment effects, we analyze data from 11 chaebol leaders prosecuted between 2003 and 2013. The results show no significant deterioration in key performance indicators following prosecution. Instead, capital expenditures increased significantly, particularly beginning three years after prosecution. These results remain robust even after accounting for firm and industry characteristics, including firm size and age. The findings stand in marked contrast to evidence from Western economies, where corporate misconduct typically triggers severe market discipline. Our results suggest the emergence of alternative governance mechanisms, particularly through the adoption of professional management systems, that effectively maintain organizational stability and continuity.
Patterns of Knowledge Spillovers between Frontier and Laggard Firms in Korea
Year 2025 / Vol 17 / No 4
This study analyzes the patterns of knowledge spillovers between frontier and laggard firms in Korea using patent citation data over the period 2002-2016. Frontier firms are defined as large firms as well as global firms engaged in international patenting. The analysis reveals that the frequency with which laggard firms cite the patents of frontier firms remain very low, while the frequency with which frontier firms cite the patents of laggard firms has decreased significantly during the sample period. These findings point to poor spillover effects as a source of economic concentration in Korea.