Sungil Kwak

Regional Agricultural Endowments and Shifts of Poverty Trap Equilibria: Evidence from Ethiopian Panel Data

We examine changes in patterns of equilibria over time and across regions, applied to the Ethiopia Rural Household Survey. We revisit incidence of multiple equilibria using new nonparametric techniques, and examine single equilibria that remain stagnant below the poverty line. Using quantile regressions, we identify differences across the income distribution. We introduce the empirical analysis of sequences of equilibria. We identify a single equilibrium in 1994--1999 but find a second, higher equilibrium emerging in 1999--2004 -- evidencing a shift from unimodal toward a bimodal asset distribution. The most deprived region exhibits a low-level stagnant equilibrium despite significant rural income growth nationwide.

Evaluation of Korean SMEss Management Status in Southeast Asia and Policy Implications)

Korean Abstract: 기존 진출기업 지�?정책�?� 수출촉진�?� 위해 진출 �?�전단계�? 집중한 나머지 기(旣)진출기업�? 대한 지�?�?� 간과했다. 진출기업 지�?정책�?� 새로운 방향으로 �?�남아 기(旣)진출기업과 신규 진출기업 간�?� 신(新)�?태계 형성�?� 위한 지�?�?� 필요하다. 본 연구는 �?�남아 지역�?서 활�?� 중�?� 중소기업�?� 경�?실태를 분�?하여 효과성 높�?� 해외진출 중소기업 지�?정책�?� 방향성�?� 제시하는 것�?� 목�?으로 하고 있다. �?�를 위해 �?�남아 주요국�?� 주요 대내외 경제여건 변화를 정리하고 �?�남아 진출 한국 중소기업�? 미친 �?향�?� 분�?할 �?만 아니�?�, 설문조사 �? 현지 조사를 통해 �?�남아�? 기(旣)진출한 중소기업�?� 우리나�?��?� 수출확대와 신규로 �?�남아 진출�?� �?��?하는 중소기업�?� 안정�?�?� 진출 토대로 기능할 수 있�?��?� 확�?�한다. 마지막으로 진출기업 지�?정책�?� 새로운 방향성으로 기(旣)진출기업과 신규진출 기업 간�?� 협업�?� 통한 새로운 �?태계 형성 지�?방안�?� 제시하고 있다. 기존 진출기업 지�?정책�?� 수출촉진�?� 위해 진출 �?�전단계�? 집중한 나머지 기진출기업�?� 간과한 측면�?� 있었다는 �?�?서 정책�?으로 새로운 접근�?��?� �?�?한다. English Abstract: The entry pattern of Korean small- and medium-sized enterprises (SMEs) into Southeast Asia was influenced by the ASEAN FTA in 2007 and the global financial crisis in 2008. SMEs that have entered the market with the aim of utilizing the low-wage labor force have been placing the most importance on entering the local market since 2007. In addition, after the global financial crisis in 2008, large corporations reshaped their production network rapidly to Southeast Asia, but not to SMEs, which were vulnerable to risk. Fortunately, since 2014, SMEs’ investment in Southeast Asia has recovered to pre-2008 levels, mainly in Vietnam and Indonesia. As Golovko and Valentini (2011) pointed out, it is possible to measure the business performance of the enterprise to the extent that the small- and medium-sized enterprises enter the overseas market. While many Korean SMEs have moved into Southeast Asia, there are still very few studies that have conducted fundamental research into their management status. Instead, there have been abundant studies about how to enter Southeast Asia in order to meet the needs of Korean companies that want to go there. Considering the shortage of information on the management status of Korean SMEs participating in the regional production network (RPN) Korean large corporations have newly established in the Southeast Asian region, data on the Korean SMEs in Southeast Asia is required to prepare the future direction and the support policies for the SMEs. This study was conducted to meet this demand. The second chapter summarizes how the economy of Southeast Asia is affected by changes in the external environment, such as slowing growth in the Chinese economy, low prices of raw materials, collapse of mega-FTAs, and the recent strengthening of protectionism. Chapter 3 analyzes the investment strategy of Japanese SMEs in Southeast Asia. We examine the response of the Japanese government and SMEs to changes in domestic and international economic conditions in Southeast Asia. Chapter 4 analyzes the management status and business performance of SMEs entering Southeast Asia through surveys.

Localization Strategies in Response to Recent Changes in the Southeast Asian Labor Market Environment

Southeast Asia still has the potential to attract FDI from Korean firms even though the labor market environment has been changing at a very swift pace as of late. For example, as the increase in FDI improves the total factor productivity of firms operating in Southeast Asia, the wages of workers in this region have accordingly skyrocketed. As income growth led workers in the region to devote greater attention to democracy and human rights. Ongoing changes in Southeast Asias labor market are likely to have an adverse impact on Korean firms operating in the region, though the extent of the impact will differ across industries, firm sizes, and technology levels. Therefore, we suggest that government policies for FDI should be redirected to support localization efforts of firms operating in Southeast Asia. As these firms operate in foreign countries, they do not create jobs domestically. The existing literature, however, tells us that they positively affect domestic productivity and employment. This provides a reason for governments, including Korea’s, to identify effective policy measures that can support firms to successfully meet challenges and localize in these ever-changing markets of Southeast Asia.

Environmental ODA to Africa: Policies, Determinants and Implications

We explore the trends and policies of environmental ODA - that is, aid with a focus on the environment - and empirically analyze the determinants of Japanese and Swedish environmental ODA for Africa utilizing the OECD CRS(Creditor Reporting System) data. We find that each country has its own environmental ODA policies. Various models were used, moreover, to assess the determinants for Japan and Sweden’s environmental ODA. The Hausman test reveals that the random effect model is most fitting for Japan, and the fixed effect model for Sweden. This means that for Japan, observable characteristics and unobservable heterogeneity have no correlation; consequently, these two factors are not simultaneously considered when determining environmental ODA to Africa. On the other hand, the fact that Sweden’s environmental ODA to Africa is determined based on the fixed effect model means that a correlation exists between unobservable heterogeneity and observable characteristics, which is in turn because Sweden considers both observable and unobservable factors when determining environmental ODA to Africa.

Financial Inclusion and Microfinance: On the Cases of ODA and Analysis of the Poverty Reduction Effect

This study analyzes the microfinance ODA projects of Germany and Australia, and presents the exemplary characteristics of each country that Korea will be able to use for Korean microfinance ODA projects. Moreover, this study makes an empirical analysis of whether the use of microfinance reduces poverty by using the methodology of Imai et al. (2012). In particular, this study casts light on the two aspects overlooked by Imai et al. (2012): (1) suitability tests for instrumental variables using a variety of methods and (2) estimation of poverty reduction effect by using two explanatory variables — average amount of microfinance loan per person and microfinance market size per country measured by the ratio of the total microfinance loan amount to GDP. We find evidence that the poverty rate significantly decreases by 0.463% as the average microfinance loan amount per person increases by 10%.

Korea's Cooperation Schemes to Development of Small and Medium Enterprises in Ethiopia

The purpose of this study is to analyze the roles of Korea in the promotion of SMEs in Ethiopia as a means of development cooperation. SMEs in Ethiopia are experiencing the following barriers: low infrastructure, business-related policies and regulations, constraints to access credit, and the lack of government-led technical supports. We show that those constraints are linked and affect each other. To remove those interlocking constraints hindering the development of SMEs, this study presents two policy suggestions. The first is the use of micro-finance. The constraint to access credit causes the lack of capital to block the accumulation of human capital and technology so that the SMEs cannot grow. Korea can provide ODA to the micro-finance institutes as a form of public-private partnership (PPP) projects to support the development of SMEs in Ethiopia. The second policy suggestion is to provide a comprehensive aid program. Before establishing the program, Korea must join the Development Assistance Group (DAG) in Ethiopia. Korea has to avoid making the decision that Korea alone will support the project the recipient country requests. Instead, Korea in consultation with major donor countries should select proper projects. Through this consultation process, we can clearly identify effective aid areas and achieve the harmonization of aid. First, each donor country proposes projects in the sectors of comparative advantage. Combining the proposed projects in consultation with other donors establishes a comprehensive program. This program could provide a means to untangle the tangled constraints. That is to say, interlocked constraints could be overcome through this program.

Trends in the African Construction/Plant Building Market and Implications for Korea

Africa is the poorest continent in the world in terms of public infrastructure. In any country with functioning public infrastructure, and roads form the backbone of transportation; responsible for the 80-90% of movements of people and goods. In Africa, however, only 20% or so of existing roads have been paved. The vast majority of existing railways was laid during the colonial era and is now obsolete, unable to function properly. Much of its port and airport facilities are similarly outdated, becoming, in effect, the major obstacle to the continents economic development. Particularly conspicuous as well is the absence of proper electricity infrastructure. Almost 800 million Africans live in the sub-Saharan region, but the aggregate power generation capacity of the region lags behind the capacity of Spain (with a population of 45 million). If South Africa is not counted in with sub-Saharan Africa, the regions power capacity is lowered to the level of Argentina. Nearly a quarter of the existing power facilities are out of order and obsolete. Thirty or so African countries, therefore, experience power outages on a daily basis with serious economic losses as a consequence.

The Impact of Taxes on Charitable Giving: Empirical Evidence from the Korean Labor and Income Panel Study

Households’ or individuals’ decision regarding charitable giving may differby type of recipient of the gift. In light of the relative paucity of empirical research on the impact of tax incentives on charitable giving outside Western countries, empirical research on this topic in South Korea is valuable in order to compare effects across difference tax regimes and in different institutional environments. We use the Korean Labor and Income Panel Study (KLIPS), whose panel structure helps alleviate the omitted variable bias that has often appeared in previous literature using cross-sectional data. This study aims to perform a robust estimation of tax price and income elasticities for charitable contributions in South Korea. First, we use exogenous changes in tax rates resulting from Korean Tax Reform to construct instrumental variables (IVs) for the change in the price of giving. Two tests are undertaken to determine whether the IVs are weak or not: a size-corrected test of a weak IV robust inference for the linear instrumental variable model with autocorrelation and heteroscedasticity recently devised by Finlay and Magnusson; and the LIML CUE-GMM estimation. We find that our instruments are not weak. Following Smith and Blundell, and Rivers and Vuong , we then estimate the random effect (RE) Tobit Model using acontrol function based on the IVs. Using the procedure developed by Mundlak, we estimated a fixed effect model from the RE Tobit model. The tax price and income elasticities from the pseudo-fixed effect Tobit model are found to be significant and the magnitudes are similar to those from the GMM fixed effect and CUE-GMM models. To investigate additional features of the conditional distribution of charitable giving in South Korea, we use the Censored Quantile regression with instrumental variables (CQIV) recently proposed by Chernozhukov, Fernandex-Val, and Kowalski. These estimate indicate that the price elasticity of charitable giving is very heterogenous among donors, while income has a quite uniform and positive effect over the whole range of the giving distribution significantly.

Regional Difference and Counterfactual Decomposition of Pro-Poor Growth: An Application to Rural Ethiopia

Previous literature, ignoring regional heterogeneity, has mainly ex-plored the interrelationship among growth, inequality, and poverty. In exploring the incidence of poverty and growth, we classify rural Ethiopia into three regions based on the difference of production technologies and climates. We find evidence that regional heterogeneity exists across the three regions. To find the sources of heterogeneity, we estimate a pseudo-fixed effect probit model controlling for household fixed effects within a random effect probit model across regions. We find that poverty is determined by different sources across the three regions, each with different farming systems. Moreover, poor households can escape poverty only when their expected level of well-being has been improved by increases in asset holdings and/or returns to assets. Hence, we propose, using counterfactual decomposition, that pro-poor growth can be decomposed into two components: changes in the amount of attributes such as observable household assets or capital, and changes in ‘aggregate marginal product’ of the attributes. We find that the impacts of the changes in the aggregate marginal product on pro-poor growth are significant in the hoe area, but the changes in attributes do not significantly affect growth in this region. The aspects of growth are determined heterogeneously across regions: in the highland area, both components work together; in the hoe area, growth is mainly determined by changes in the aggregate marginal product; and in the enset area, it is changes in attributes that mainly determine the positive growth. We find evidence that pro-poor growth in a relative sense appear in the hoe area, where the impact of changes in the aggregate marginal product on growth is heterogeneous along the income distribution; the larger impact appears in the lower tails, while smaller impact can been seen in the upper tails. However, we find no evidence of pro-poor growth in the highland and the enset areas, where the impacts of the aggregate marginal product on growth are anti-poor and insignificant, respectively. Therefore, since the impact of changes in productivity on growth differs across regions, technology disseminated to increase household productivity should be tested whether it could generate pro-poor growth in the recipient’s environment. For example, in providing agricultural technologies through the Korea Project on International Agriculture (KOPIA) or new knowledge via the Knowledge Sharing Program (KSP), we have to deliberate carefully on whether the knowledge and technology do indeed have pro-poor aspects.