Se-Jik Kim

Human Capital Flight: Impact of Migration on Income and Growth

An endogenous growth model with heterogeneous agents is analyzed to show that “human capital flight” or “brain drain” can lead to a permanent reduction in income and growth of the country of emigration relative to the country of immigration. Convergence between the two is therefore rendered unlikely with such migration. While, in a closed economy, subsidizing human capital accumulation at all levels of education can benefit economic growth, in an open economy where the educated are more likely to migrate, growth may be better fostered by subsidizing only lower levels of education.

Growth effect of taxes in an endogenous growth model: to what extent do taxes affect economic growth?

Abstract This paper presents an endogenous growth model comprising of financial, human and physical capital and incorporating major features of a general tax system. Technology and preference parameter values in the model are chosen to fit the actual growth experiences of the United States and a rapidly growing East Asian NIC. Using the calibrated model, I assess the role of differences in taxes and other variables in explaining the difference in growth rates. The main findings are: (i) the difference in tax systems across countries explains a significant proportion (around 30%) of the difference in growth rates; (ii) the difference in preferences explains at most 4%; and (iii) differences in labor income tax, debt-equity ratio and inflation can be important in explaining the growth difference. Further, I evaluate the contribution of the monetary factor to the growth rate gap, and the growth effect of US tax reforms, e.g., revenue-neutral changes in relative tax structure.

Bailout and Conglomeration

The paper suggests that when firms differ stochastically in their productivity, a bank may find it optimal not to bail out the failed nonconglomerate firms at all, but to bail out conglomerates fully. Expectation of such bailout policy may encourage risk-averse firms to join a conglomerate to minimize the risk of liquidation. Furthermore, in case of private information, bad firms follow good firms` decision on conglomeration to hide their type. Finally, the paper discusses the impact of conglomeration on the debt-equity ratio and the expansion of existing conglomerates through mergers and acquisitions.

Growth Gains from Trade and Education

This paper presents a multisector growth model where education enhances general human capital, which is essential for increasing or maintaining the mobility of workers across industries. The paper shows that education, combined with international trade, can affect growth positively in the long run by raising workers` ability to adapt and move easily to industries with the greatest productivity in each period. Depending on the initial ratio of general-to-specific human capital stock, multiple equilibrium growth paths can exist, including a poverty trap. If the ratio is not substantially low, trade liberalization can allow an economy in a poverty trap to transform into one with continuous education and higher output growth.

Macro Effects of Corporate Restructuring in Japan

This paper presents a framework for quantitatively evaluating the macroeconomic effects of corporate restructuring and applies that framework to Japan. Using firm-level financial statement data, this paper estimates total factor productivity of individual Japanese firms. Given the estimated distribution of productivity across firms, this paper simulates the effect of optimal restructuring, that is, reallocation of resources from less-productive firms to more-productive ones, on the dynamic path of aggregate output. In a benchmark case, aggregate output declines by 0.8 percent in the year of restructuring, but converges to a level 1.6 percent above its initial level in the medium term. The present value of net output gains from restructuring over 20 years amounts to 15 percent of the initial output under a 5 percent discount rate, suggesting that the benefits of restructuring may exceed the costs. With different assumptions, the present value of net output gains could range between 13 percent and 31 percent of the initial output.

A General Equilibrium Approach to Interenterprise Arrears in Transition Economies with Application to Russia

This paper presents a general equilibrium model of interenterprise arrears, characterized by n-stage production technology with random productivity shocks. The model shows that large interenterprise arrears in transition economies may reflect substantial business risks in those countries and that rapid privatization and commercialization may contribute to a huge initial accumulation of trade credits and arrears. The paper also suggests that administrative measures aimed at immediate reduction of IEA such as imposition of prepayments and penalty charges, would not be as effective as partial equilibrium frameworks suggest. Consequently, a fundamental solution should be sought instead in reducing business risks or improving enterprise information. Finally, the paper discusses the relevance of the model to Russian experience in 1993 and 1994.

Timing of International Bailouts

This paper proposes that international rescue financing should not be provided to a country where a crisis first occurs, but rather to any country that suffers a subsequent crisis. Such a timing-based lending facility can be Pareto-superior to both laissez-faire and existing international crisis lending facilities, when domestic governments have more information on their own economies than does the international lender of last resort. The new facility mitigates moral hazard owing to information asymmetry by not rescuing the first-hit country. At the same time, it limits crisis contagion by rescuing countries in subsequent crises. Even in the presence of common shocks, the timing-based facility can reduce global risks of crisis because it induces countries to undertake greater crisis-prevention efforts so as not to become the first country hit.