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Trade, reform and structural change in South Korea

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  • Trade, reform and structural change in South Korea
  • Betts, Caroline; Giri, Rahul; Verma, Rubina
  • International Monetary Fund


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Title Trade, reform and structural change in South Korea
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Material Type Reports
Author(English)

Betts, Caroline; Giri, Rahul; Verma, Rubina

Publisher

[Washington, D.C., U.S.] : International Monetary Fund

Date 2017-04
Series Title; No IMF Economic Review / Forthcoming
Pages 52
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Industry and Technology < Others
Holding Munich Personal RePEc Archive
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Abstract

We develop a two country, three-sector model to quantify the effects of Korean trade policies for structural change from 1963 through 2000. The model features non-homothetic preferences, Armington trade, proportional import tariffs and export subsidies, and is calibrated to match sectoral value added data on Korean production and trade. Korea’s tariff liberalization increased imports and trade, especially agricultural imports, accelerating de-agriculturalization and intensifying industrialization. Korean subsidy liberalization lowered exports and trade, especially industrial exports, attenuating industrialization. Thus, while individually powerful agents for structural change, Korea’s tariff and subsidy reforms offset each other. Subsidy reform dominated quantitatively; lower trade, higher agricultural and lower industrial employment shares, and slower industrialization were observed than in a counterfactual economy with no post-1963 policy reform.