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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

Presidential Address : Current Status and Challenges of Data-Based Research in Economics

Jaesung Choi (Sungkyunkwan University) and Yoon-Jae Whang (Seoul National University)

Year 2024 / Vol 72 / No 1

Interest in evidence-based policies and efforts to use administrative data for this purpose are global trends, and research that links administrative data held by the government and uses it to identify causal relationships plays an important role in policy development and evaluation. In Korea, discussions on the use of administrative data for evidence-based policy research have been steadily conducted in the past, but the results are still very limited. This study aims to identify the potential for domestic research using administrative data and lay the groundwork for future cooperation between the government and academia. To achieve this objective, we collected bibliographic information and JEL classification codes for articles published in four leading journals in the field of economics and used them to examine trends in overseas research using administrative data. Furthermore, based on 12 research plans submitted by members of the Korean Economic Association, we introduced research that can be conducted using domestic administrative data and summarized the administrative data required for such research. This study will be useful for the government in prioritizing the targets of administrative data disclosure for evidence-based policies and in determining the priority of linkage between various administrative data. Additionally, if the demand for administrative data proposed in this study is reflected and accessibility is improved, it is expected that empirical research on policy agenda development and policy evaluation will rapidly expand in South Korea. 

The Income Cliff Effect after Retirement in South Korea

Taehee Oh (Incheon National University) and Jangyoun Lee (Incheon National University)

Year 2024 / Vol 72 / No 1

 This study utilized the Korean Longitudinal Study of Aging to capture the rapid decline in income at the end of working life (“Income Cliff Effect”) and identified the main causes behind it. The empirical analysis from the Heckman 2-stage fixed-effect models reveals that the labor income of older workers decreases by an average of 42% from the age of 58 to 68, and it is estimated that aging and the separation from career jobs explain 89% of this income decline. Furthermore, while a transition to bridge-job employment has a short-term negative impact on income, a transition from a career job not only leads to a larger decrease in income but also results in a prolonged negative income shock. In particular, this income cliff effect is mainly observed among the high-education and high-income groups. These findings suggest that in order to reduce the high elderly poverty rate in Korea, support should focus on qualitative rather than quantitative aspects of post-retirement jobs for ensuring the better use of experiences and expertise acquired during their working life. 

Market Prices in North Korea: 2006~2022

Song Lim (Bank of Korea) and SeungHyun Moon (Seoul National University(

Year 2024 / Vol 72 / No 1

This paper reanalyzes the cost of living in North Korea, which has been discussed mainly concerning rice prices, through the price index. The analysis results show that North Korea’s market price fluctuations are a monetary phenomenon caused by changes in liquidity in the long term, and in the short term they are affected by internal and external environmental changes, such as natural disasters, failure of currency reform, strengthened international sanctions against North Korea, and the COVID-19 pandemic. During the period from 2006 to 2012, the currency over issuance for the purpose of making up for the fiscal deficit acted as a dominant factor in the rise in prices. After 2013, prices fluctuated mainly due to the supply and demand situation in the real sector, while North Korean authorities restricted any increase in liquidity. Since 2016, international sanctions against North Korea have been strengthened, and imports from China have plummeted to an unprecedented level due to the 2020 COVID-19 pandemic. As a result, prices rose mainly for imported foodstuffs and medicines. On the other hand, since 2013, when prices began to stabilize, a phenomenon in which rice prices have moved in a different direction from prices has been observed. It means that the rice price trend since 2013 does not explain the change in prices. 

KOREAN ECONOMIC REVIEW

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. 

KOREAN ECONOMIC FORUM

The Bank of Korea’s Policy Response during the High Inflation after COVID-19

Young Hwan Park (The Bank of Korea) and Chang Yong Rhee (The Bank of Korea)

Year 2024 / Vol 17 / No 1

Like other major economies, Korea was faced with unexpected high inflation after the pandemic. In response, the Bank of Korea continued its tightening stance in order to stabilize inflation, including the most rapid and substantial series of policy rate hikes in history, moving from 0.5% to 3.5%. Throughout this process, the BOK encountered various policy challenges, such as a sharp currency depreciation and financial stress, from which the bank gained many valuable insights including policy cooperation with the government, labor market conditions, responses to currency depreciation, policy measures for financial stability, institutional improvements for financial stability, and policy communication. 

Aging and Inequality of Income and Consumption in Korea

Nak Nyeon Kim (Dongguk University)

Year 2024 / Vol 17 / No 1

This article estimates the effects of age, birth cohort, and survey year on income and consumption inequality in Korea using the Household Income and Expenditure Survey from 1990 to 2022. According to the results, inequality increases with age, and in particular, in the case of income, this age effect becomes larger as people become older. This is because, unlike developed countries with mature pension systems, inequality in Korea has actually increased due to the large number of people who have no or minimal pension after retirement. The effect of birth cohort on consumption inequality is U-shaped, showing a downward trend in inequality up to the birth cohort in the 1970s and the opposite trend thereafter. It is found that inequality among the children’s generation increases as the parents’ generation, which accumulated wealth through a period of rapid growth, increases gifts to their children. Furthermore, I estimate the inequality effects of major macroeconomic variables while controlling for these three time-related variables. In the case of income, the unemployment rate increases inequality and the employment growth rate decreases. The effect of opening to the outside world is that trade increases inequality, but foreign direct investment has the opposite effect of inflow and outflow. Variables related to financial development and income redistribution was all found to have lowered inequality. These effects all depend on age and appear to increase with age. 

New Direction of Evaluation on Labor Market Program Application of Causal Machine Learning to Vocational Training in Korea

Yong-seong Kim (Korea University of Technology and Education)

Year 2024 / Vol 17 / No 1

This study introduces a machine learning method (DML) recently used for causal analyses on labor market issues and presents the results of applying DML to Korea’s vocational training data. Voluminous studies have estimated the effect of training on employment and they have come up short of consensus. The DML’s flexibility in setting relationships of variables may help to avoid problems related to model specification. The DML’s properties of the debiasedness and robustness may also provide what the reasonable range of training effects should be. In addition, the paper attempt heterogeneous treatment effects, which will be informative to policy implementation.