This report analyzes the structural influence that openness would bring to the Korean economy by eliminating import barriers. It also provides policy suggestions for streamlining institutions, as well as a future openness strategy necessary for ensuring the positive benefits of market opening.
The study examines the impact that import competition from China has on the Korean economy, which lies somewhere between the stages of a developing and advanced economy, and possessing both capital- and skill-intensive resources, assuming Korea were to follow in the steps of advanced countries such as Japan or the U.S. Overall, the capital and skills-intensive companies in Korea have grown relatively faster in the manufacturing sector, attesting to a definite transition from a simple labor-intensive industrial nation to a capital- and skill-intensive labor market. Amid this transition, import competition from China is clearly having an adverse effect on the growth of companies. This trend is similar to that shown in previous studies where U.S. companies were found to be negatively affected by import competition from low-income countries. But the study shows that this adverse impact is more apparent in the capital-intensive sectors. Also, there is no clear evidence of skills-intensive companies growing faster given the same import competition from China. This is contradictory to research in the U.S., which found that the adverse impact caused by import competition from low-income countries on the growth of companies was smaller when companies were more capital- and skills-intensive.
This study also found that even though certain advanced countries eventually gained a comparative advantage in the capital- and skills-intensive sector, this does not necessarily constitute the rule for advancing economies. In other words, the production growth of a company in an industry with high import competition from Japan at one point is found to experience relatively lower growth after a certain point of time.
Comprehensively, the empirical analysis of this study indicates that under the environmental changes of growing pressure in import competition from China, Korea, undergoing its own transition into a country with relatively sufficient capital and skilled labor, will likely face difficulties in the process of materializing company growth in sectors where traditionally advanced countries have enjoyed a comparative advantage.
개방화 시대의 한국 경제(The Korean economy in the era of trade liberalization)
구조적 변화와 정책과제(Structural changes and policy implications)
|Series Title; No||연구보고서|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|