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Recent empirical evidence suggests that U.S. protectionist lobbying expenditures rose while U.S. trade barrier fell. We find that the same result holds in our panel data sample from 28 countries be...

PurposeThe existing literature on aid for trade (AfT) tends to support the effectiveness of AfT in improving trade capacities and enhancing the export performance of recipient countries. While aid directed at trade-related infrastructure (e.g. ports and roads) is reported to drive the overall effect of AfT, the increasing importance of labor market flexibility and informal labor in export environment has been largely overlooked. The purpose of this paper is to test two hypotheses regarding the relationship between labor market flexibility, exports and AfT. First, flexible labor regulation promotes exports by reducing adjustment costs related to the export process. Second, for informal labor-intensive export sectors, AfT effectiveness may be compromised by the contraction of the informal sector due to labor deregulation as it deteriorates comparative advantage that supports recipients’ export competitiveness.Design/methodology/approachSince first introduced by Tinbergen (1962), the gravity model has been widely used to analyze bilateral trade, and its usefulness has been verified in several prominent empirical studies (e.g. Anderson and van Wincoop, 2003; Helpman et al., 2008). However, despite the empirically successful framework of the gravity model, the standard gravity equation may not be appropriate for estimating the effect of AfT in the paper. The main interest lies in whether aggregate AfT flows enhance the export “performance” of individual recipients, that is, whether they improve the recipients’ total exports rather than their bilateral exports. For this purpose, the authors took aggregated approach to the gravity model from Anderson and van Wincoop (2003).FindingsThe findings suggest that while both AfT and labor market flexibility are positively associated with higher export levels, the export-promoting effect of AfT is marginally reduced by the contraction of informal workforce. These findings, however, only hold for export sectors that heavily rely on informal labor force, that is, primary commodities and resource/labor-intensive goods. The authors also find that these effects are stronger in low-income countries, indicating that the AfT initiative has been effective where it is needed the most.Originality/valueThis paper is the first attempt to analyze the relationship between AfT and exports with consideration of labor market flexibility. Using the data for 85 recipient countries, the authors test the following hypotheses. First, labor market flexibility promotes exports by reducing adjustment costs related to the exporting process. Second, the contraction of the informal sector due to labor deregulation deteriorates developing countries’ comparative advantage in certain export sectors. Hence, while both AfT and labor market flexibility are expected to enhance the export volume of developing countries, the loss from weaker comparative advantage in a form of smaller informal labor force can exceed the gains from AfT in certain sectors.

Even though there is a well-known empirical and theoretical link between lobby and the free-rider problem, the existing literature only attributes its findings to the free-rider rather than the measurement of its extent. We develop broader theoretical micro-foundations for measuring free-riding and investigate the determinants of tariff rates from the perspective of corporate lobbying and free-riding. Our estimation result shows that the degree of free-riding not only varies across industries but is particularly high in larger industries indicating the underutilization of lobbying. The tariff rates under monopoly are about 8 times higher than under perfect competition in most industries suggesting that stakeholders should maintain higher industry protection levels through lobbying.

A substantial number of studies have suggested that global outsourcing can induce wage inequality. As Feenstra and Hanson [(1996a) Foreign investment, outsourcing, and relative wage, in: R. C. Feestra, G. M. Hanson, and D. A. Irwin (Eds.) Political Economy of Trade Policy: Essays in Honor of Jagdish Bhagwati (Cambridge: The MIT Press), pp. 89–127] argued, global outsourcing is comparable to skill-biased technological change in that global outsourcing is more likely to increase the wage of skilled workers rather than their unskilled counterparts. We examine the effects of outsourcing on wage of skilled and unskilled workers in Korea's manufacturing sector with a focus on the dissimilar effects of outsourcing to developed countries (DCs) and less developed countries (LDCs) on relative wage. The results of system and difference GMM estimation based on manufacturing data from 1992 to 2006 indicate that outsourcing to DCs and LDCs have opposite (and significant) effects on relative wage, that is, outso...

This paper examines the effects of participating in the KIC on firms’ productivity using firm-level data from 1998 to 2012, focusing on the textile sector. To do this, we implemented PSM estimations employing the radius matching method with 0.01 caliper and 10nearest-neighbor matchings with replacement. We found 100 matched firms in control groups(domestic firms) that corresponded to each of the 10 treated firms. For analysis, we used a difference-in-differences (DID) framework and extended the basic DID framework to the event study framework of Gathmann et al. (2018). The results reported that the treated firms experienced the increased sales but the improvement in sales had not lead to improvements in productivity. These results can be found in the DID event study as well as the DID analysis. That is, improvement in productivity through FDI cannot be found in the empirical results.

Korean Abstract: 본 보고서에서는 신남방지역에서 글로벌 가치사슬이 확대, 심화되는 과정에서 한국의 ODA의 활용방안에 대한 심층 연구를 수행하였다. 그동안 단편적으로 이루어져왔던 글로벌 가치사슬 및 ODA에 대한 연구에서 벗어나 두가지를 융합하여 보다 현실에 근사한 방법론을 고안하고 이를 통해 우리나라의 신남방지역 진출확대를 위한 정책적 시사점을 도출하였다. English Abstract: The purpose of this research is to propose policy implications and recommendations for the government’s New Southern Policy from the perspective of trade issues, thus enabling a more integrated policy that can be linked with Korea's ODA strategy and also strengthen global value chains in ASEAN and India. In order to achieve these research objectives, this report reviewed the recent developments in and characteristics of foreign relations in strategic regions to the south of Korea and compared the ODA strategies for major countries in the new southern regions. In addition, after analyzing the global value chain in new southern regions and empirically studying the relationship between the global value chain and ODA, we present suggestions for ODA policy and concrete policy measures.

Trade literature has found that the impact of globalization on the domestic labor market depends, among other factors, on the sourcing country’s income level, the education level of domestic workers, and the occupations involved. This paper investigates another factor that might determine the effects of globalization on the domestic labor market: the worker’s contract type (i.e. permanent vs. temporary contract). We pay particular attention to wages and examine whether the contract type influences the impact of offshoring. Individual-level wage data from the Korean Labor & Income Panel Study during 1999–2007, linked to industry-level offshoring data from the World Input–Output Database are used to answer this question. Even after controlling for individual worker and employer characteristics, industry, and occupation, we find that South Korean manufacturing workers’ wages increase as offshoring increases, but this impact is significantly weaker for temporary workers. Thus, our findings support public concern that globalization exacerbates inequality and shows that one potential channel of growing inequality is the contract type.

This study examines the effects of several factors indicating economic openness- imported intermediate goods, total imports, IFDI (inward foreign direct investment), and foreign ownership-on regular, irregular jobs and the ratio of irregular employment to regular employment. Findings revealed that imported intermediate inputs and IFDI affected neither regular nor irregular job figures. However, an increase in total imports led to a decrease in the number of irregular jobs without affecting regular full time jobs, leading to a decrease in the ratio of irregular jobs to regular jobs. On the other hand, changes in foreign ownership structure had a contrary effect, that is, a decrease in the number of regular jobs and an increase in irregular ones, and, thus, an increase in the ratio of irregular jobs to regular jobs. Overall results showed that a rise in imports results in depressed overall employment, irregular employment in particular, while more IFDI results in more irregular jobs replacing regular ones, effectively exacerbating job insecurity. The implication of this analysis is that greater economic openness may have a negative impact on the South Korean labor market overall.

This paper investigates the effects of foreign direct investment (FDI) on the host country's economic performance, namely, its total factor productivity (TFP). Such effects are often referred to as FDI externalities or spillover effects. In addition, the paper examines whether such spillover effects depend on the home country's income level. Our empirical findings indicate that FDI flows have positive effects on less developed countries (South countries), and that the effect of FDI flows from the developed countries (North countries) is stronger than that from less developed countries. That is, these results confirm the so-called North-South effects but provide no evidence of South-South effects. Furthermore, another channel of spillover effects is imports, which have significant effects on TFP.

This study investigates Korea's motivations for foreign aid allocation, analyzing panel data from over 180 countries for the last 20 years. The results show that Korea's aid allocation reflects both recipient needs and Korea's own national interests but does not consistently consider aid effectiveness. Korean aid is also characterized by its use as an instrument of both summit diplomacy and resource security. In addition, its commercial motivations appear to have shifted over time, from export promotion to overseas investment support. Despite internal and external pressures, there is no obvious evidence that Korea's allocation rule converges with international guidelines that recommend greater consideration of recipient needs and aid effectiveness and less consideration of donor interests. © 2015 The Earth Institute at Columbia University and the Massachusetts Institute of Technology

Korean Abstract: 본 연구는 세계무역의 현황을 살펴보고 세계무역 변화의 구조적인 요인을 분석하여 우리나라 무역의 안정적 성장을 위한 정책적 시사점을 도출하기 위해 추진하였다. 이를 위해 세계투입산출 데이터베이스를 이용하여 세계무역의 구조 변화를 분석하고, 부가가치무역의 변동을 항목별로 분해하였다. 제2장에서는 2000년대 중반 이래의 세계무역 추이와 GDP 비중 등을 살펴보고 주요국별 및 주요 산업별 수출증가율의 변화를 살펴보았다. 제3장에서는 세계무역의 구조가 어떻게 변화하고 있는지를 살펴보았다. 제4장에서는 세계적 무역둔화 요인을 분해하기 위해 세계투입산출표를 이용하여 수출부가가치(VAX: value added exports)의 변화를 분해하였다. 제5장에서는 2017년 세계무역의 회복 요인을 평가하고 앞서의 분석 결과를 토대로 우리나라 무역에 대한 정책시사점을 도출하였다. 본 연구의 분석결과는 수출부가가치의 제고와 국내산업의 핵심역량 강화를 위한 정책 마련에 활용될 것으로 기대된다. English Abstract: The global trade slowdown since 2012 is reputed to be very astonishing in that it was unpredictable in terms of the magnitude. This trade slowdown was cyclical in that it mainly resulted from the global economic recessions especially in China and Europe. Also, this phenomena can be explained by structural reasons such as the fall in the income elasticity of trade, that is, the rise in income does not contribute to the trade expansion as it used to. This study aims to investigate the structural change in global trade mainly using the world input-output database and to decompose the change in value added exports into three relevant factors. This study reveals that the composition of global commodity demand has changed in recent years and the share of intermediate goods to the total import has declined as the low economic growth rate, low price level, high interest rate, and high unemployment rate have dominated the global economy since 2012. Chinese re-balancing turns out to have reduced the demand for import from the world as China, the global factory, transitioned from an export-oriented development strategy to policy focusing on domestic demand. The global value chain turns out to have diminished since the global financial crisis, thereby contributing to the global trade slowdown. The non-tariff barriers such as anti-dumping duties, TBT, and SPS, among others, have been more prevalent in recent years while the average tariff rates in most of the countries have been falling since the mid-1990s. On the other hand, this paper estimated value added exports (VAX) by using the World Input-Output Database released in 2016, in order to analyze causes of the recent global trade slowdown. We also decomposed the change in value added exports into the three factors of value-added coefficients, change in input structure, and change in final demands. According to the results, the change in value added exports in Korea are largely explained by the change in input structure, and change in value-added coefficients. Since 2012, the increase in final demands has played a major role in the recovery of value added exports at world level, while in Korea, increase in input structure explains more of rise in value added exports. That is to say, the change in value added export is cyclical at the world level, while structural in the case of Korea. The findings of this study indicate that it is crucial for Korea to reinforce the core competence of domestic industries in line with the following. First, Korean industries need to diversify their export products and gear up for standardization of parts and materials, thereby pursuing preemptive industrial restructuring. Second, Korean industries need to strengthen the knowledge intensity of high-skilled labor and make the best of global value chains. Third, the Korean government needs to support processes to improve transaction practices and incentive systems for large companies and small- and medium-sized companies, thereby establishing a fair market mechanism. Finally, the Korean government will need to contribute to multilateral as well as regional trade liberalization.

(ProQuest: ... denotes formulae omitted.)I. IntroductionRecently, globalization has been rapidly progressing with the help of such factors as reduction in transportation costs, development of IT technology, and lowered trade barriers, which consequently have accelerated the OFDI (Outward Foreign Direct Investment) of multinational corporations to optimize their productivity. The scale of OFDI around the world soared to 1.4 trillion U.S. dollars in 2012 from 21.4 billion U.S. dollars in the 1990s (UNCTAD, 2012). The dramatic increase in OFDI becomes a direct cause of "deindustrialization" as it accelerates relocation of production activities overseas (Kang and Lee, 2011).It has started to become more convincing that OFDI and the diminished domestic production activities caused by deindustrialization could create negative impacts on the labor market in terms of employment and wages. In particular, a concern was raised that relocation of production sites could reinforce wage inequality, victimizing specific laborers. For instance, Slaughter (2000) points out that affiliate activities of multinationals may substitute unskilled-labor- intensive production, giving rise to the relative demand-shift from skilled to unskilled workers.The purpose of this paper is to find empirical evidence that OFDI tends to accelerate wage inequality. However, this paper addresses the possibility that the effect of OFDI can be heterogeneous depending on the types of workers. Using individual panel data published by Korean Labor Institute (KLI), we classify the workers into four categories depending on skill-intensity and job-permanency. Moreover, we examine the effect of OFDI based on investment destination: OFDI to OECD and non-OECD countries. The empirical results indicate that permanent workers obtain more wage-benefit than temporary ones by OFDI regardless of skill-intensity. In addition, when OFDI is divided into OECD and non-OECD, it turns out that their impacts are quite different.In fact, the wage inequality triggered by reallocation of production is not a surprising issue, and there have been active discussions. According to Feenstra and Hanson (1996a), one of the most representative studies regarding the issue, 15-33 % of wage inequality observed in the manufacturing industry in the U.S. from 1979 to 1990 can be explained by global outsourcing. Other analogous studies conducted on the effects of global outsourcing or OFDI on increasing wage inequality also drew similar conclusions (Anderton and Breton, 1999; Head and Ries, 2002; Hijzen et al., 2005; Hsieh and Woo, 2005; Ahn et al., 2008; Becker et al., 2008; Driffield et al., 2009; Ebenstein et al., 2012). On the other hand, Slaughter (2000) concludes that relocation of multinational corporations' production activities does not necessarily increase relative demand for skilled labor. There are also a significant number of researches that estimate that OFDI has little effect on relative demand for skilled labor or at the least, has even positive influences. (Lipsey, 2000; Lipsey, Ramstetter, and Blomstrom, 2000b; Becker et al., 2008; Masso et al., 2008).Without considering the fact that the effect of OFDI on employment or wages can vary by individual level, however, those studies simply focus on the overall size of wage inequality. Facing the matter, Geishecker and Gorg (2008) analyzed the effect of outsourcing on individual wages through utilization of individual panel data and discovered that the effect of outsourcing on wages can be heterogeneous according to individual skill-intensity. Geishecker and Gorg (2008) categorized workers into three different groups according to skill-intensity and demonstrated an empirical analysis result that the wages of the group with the lowest skill-intensity increased by 1.8% whereas the highest skill-intensity group benefited with a 3.3% increase.Meanwhile, another perspective that the effect of outsourcing on wages can vary according to contract types (which also used individual panel data as Geishecker and Gorg (2008) did) started to gain attention. …

Using recent survey data on South Korean firms’ strategies for sourcing intermediate goods from abroad, we investigate whether there exists a productivity premium of offshoring by considering organizational forms (insourcing versus outsourcing) and the income level of offshored countries (North versus South) altogether. Thus, we consider the following four offshoring types: outsourcing from South, insourcing from South, outsourcing from North and insourcing from North. Unlike previous studies, we give particular attention to the comparison between outsourcing from North and insourcing from South and find that firms outsourcing from North are more productive than firms sourcing from their own affiliates in South. We offer three critical conditions to incorporate our empirical findings into the standard firm heterogeneity model: the fixed cost is higher for insourcing than for outsourcing and is higher in North than in South, the headquarters receive a larger share of the final revenue through insourcing th...

We study the significant variation in intrafirm versus arm's-length trade with micro data. Exploiting the fact that Korean is an uncommon second language and that Korean culture is relatively homogenous, we show how intrafirm sourcing by South Korean affiliates abroad increases with their share of South Korean employees. This positive association is pervasive and nontrivial. Parsing the data more carefully, we find that South Korean employees are primarily high skilled, and that their presence matters for internal trade, not for trade with South Korea per se. The share of South Koreans is also higher in affiliates from nonroutine sectors in host countries that are culturally distant from South Korea. Our empirical evidence thus supports especially Bergrstrand and Egger (2011) 's view of multinational in-house production for nonroutine activities that require adaptation and internal communication.

This article analyses industry-specific effects of Antidumping (AD) activities on trade, using the system Generalized Method of Moments (GMM) in dynamic panel date models. In the process of doing so, this article selected three frequent AD users, such as the US, the European Union (EU) and China. Additionally, we chose the metal/steel, chemical and plastic/rubber industries for the US cases; chemical, metal/steel and machinery/electronics industries for the EU cases; and the chemical industry for the Chinese cases. Based on the analyses conducted herein, we detected positive evidence of industry-specific impacts of AD measures imposed by the three frequent users.

The purpose of this study is to discuss the various issues regarding de-industrialisation and to systematically analyse the causes of this phenomenon. In addition, the effect of the recent increase in foreign direct investment on de-industrialisation will be analysed. Unlike extant studies, this study employs a more reliable method of estimation, known as the generalised method of moments system, for establishing the importance of foreign direct investment (FDI) with regard to de-industrialisation. For a general assessment of the different factors of de-industrialisation, including FDI, this study classifies the causes of de-industrialisation in OECD countries into external and internal factors. As a result, the analysis has proved that not only internal and external factors are major factors of de-industrialisation, FDI inflow and outflow are also major factors.

Korea, an emerging donor country, largely considers its economic relations to recipients when allocating its aid. Such practices were preceded by Japan before the 1990s. We expect those similar practices between the two countries will make resemblance in aid outcomes. On a macro-level, we show similarities in aid allocations by type, region, income, and sector. The similarities are ascertained also at a micro-level by our statistical analysis on the relationships between aid and FDI. The analysis based on the FDI gravity model and panel dynamic system GMM estimation shows that only aids from Korea and Japan create more inflow of FDI into their respective recipient developing countries. Those are contrasted with other donors’ aids, which are not related to FDI or the substitute for FDI.

Using the Asian International Input-Output table (1990, 1995, and 2000), this paper explores regional production networks and offshoring of material and service inputs in East Asia. In process of doing so, the offshoring is directly measured from the Table which is not used in the previous literature on this issue. It turns out that East Asian countries source the significant shares of inputs within East Asia. Besides material offshoring, service offshoring in East Asia becomes more and more common in the era of globalization. We also examine how this fast growing offshoring affects productivity. Our econometric results show that offshoring has a significantly positive impact on total factor productivity in East Asia. Service offshoring, in particular, plays a more significant role than material offshoring. Further, service offshoring from advanced countries, such as Japan and the United States, has a stronger impact than other countries.

What is the relationship between trade and economic growth? Does trade positively affect economic growth? Owing to the ambiguity of this relationship, the empirical relationship has remained open (Rodriguez and Rodrik, 2001; Baldwin, 2003). This paper introduces “trade structure” variables, borrowed from the paper of Lederman and Maloney (2003), and applies them to the relationship. A dynamic panel estimation for the data of 66 countries during 1991–2004 is used to verify the validity and robustness of the relationship. Trade structure variables show strong evidence of positive effects on growth. Free-trade agreements/areas (FTAs) also enhance economic growth. East Asia shows a different relationship between trade and growth than the world and reflects a weaker role of FTAs in its growth.

This paper examines how the destination of outward foreign direct investment (FDI) affects South Korean multinational parent firms. We categorize host countries into those that are developed and those that are less developed. We find that destination matters for employment and capital intensity. FDI into less developed countries is negatively associated with a firm's employment and positively associated with its capital intensity. However, FDI into developed countries does not seem to matter: the parent firm's activities do not change significantly after FDI has been made. These results may indicate that Korean FDI into less developed countries is a relocation of production lines to overseas affiliates and FDI into developed countries is done to extend markets.

Recent firm-based empirical studies examine whether firms serving foreign markets either through exports or foreign direct investment (FDI) are more efficient than their domestically-oriented counterparts. The purpose of the present paper is to study the link between performance of multinational firms and the choice to participate in foreign investment. In so doing, this paper explicitly differentiates exports and FDI decisions. Using firm-level data for large South Korean manufacturing firms, I provide evidence that the premium for FDI is huge compared to exports, and that good firms undertake FDI. Studying performance across firms, I find that firms that engage in FDI outperform other firms in the future in all possible dimensions; they are larger, pay higher wages, and are also more productive. These results are consistent with the hypothesis that good firms self-select to engage in FDI. I also find clear evidence that past FDI experience has a strong positive effect on the probability of current investment abroad. This implies that the sunk cost involved in FDI plays a role in current decisions to undertake FDI.