The Korean Journal of Economic Studies
The Trade Freeness between Korea and Major Trading Partners
Jae-kyung Kim(Seoul National University), Hye Sun Jung(Seoul National University), Hanho Kim(Seoul National University)Year 2013Vol. 61No. 2
Abstract
This study estimates the degree of trade freeness based on trade costsbetween Korea and 80 trading partners from 1990 to 2008. The approachfollows two stage: first, to introduce a trade freeness parameter from NewEconomic Geography literatures; second, to estimate border effects byeliminating the effects resulted from exogenous variables such as geographicdistances, languages, religions and human network effects from trade freenessparameters. The results show that trade freeness parameters tend to be highwith Asian countries which implies geographic proximity lowers transactioncosts. While eliminating exogenous effects from trade freeness parametersusing Random Mixed Model, we found that human network also lowers thetrade cost as geographic proximity does. Based on the estimated bordereffects, the degree of trade freeness between Korea and trading partners hasincreased 2.3% yearly on average and especially freeness with emergingexporting countries is relatively higher than with others.