Yoo-Duk Kang

Does East Asian Integration Keep Up With the European Pattern? Empirical Evidence from Intra-Industry Trade in Europe and East Asia

This paper examines development of inter/intra-industry trade in Europe and East Asia. In order to quantify the level of intra-industry trade (IIT), a biascorrected Grubel and Lloyd index is used. The finding is that IIT is more evident in intra-European trade than in intra-East Asian trade, while dynamics toward IIT have been increasingly more important in trade between East Asian economies. Vertical intra-industry trade and horizontal intra-industry trade are compared, and their share in intraregional trade in both regions is measured. The paper finds that IIT in East Asia is characterized by vertical intra-industry trade. In order to identify determinants of IIT in Europe and East Asia, a regression analysis is used, which finds that conventional determinants of IIT explain a large part of IIT in Europe, while they do not for East Asian countries. In East Asia, IIT takes place between developed countries in the region.

Designing a growth-friendly welfare system: Implications from empirical analysis of OECD countries

Abstract This article revisits arguments on relationship between welfare spending and economic growth and proposes a direction for welfare policy environment which can actually contribute to economic growth. Many studies have pointed out government size or welfare spending is negatively correlated to economic growth. Against this background, this article conducts empirical tests on welfare spending of 34 OECD countries for the period of 1996–2010. It shows that the impact of welfare spending on economic growth rate varies depending on its characteristics. Besides, countries with higher education and R&D spending and good governance display high economic growth rate despite large welfare spending. This finding suggests that welfare policy should be oriented in favor of investing in human capital and productivity and institutional reforms are important for the sustainability of welfare state.

Policies for Industrial Competitiveness Improvement in Europe and Their Implications

The global economic crisis has brought back into focus the need for a stable manufacturing base in advanced economies. Hence many debates shed new light on industrial policy with an aim to restore industrial competitiveness. In this context, this study reviews industrial strategies and policies adopted by the European Union (EU) and its Member States, and draws policy implications for Koreas industrial policy.

Real Convergence and European Integration: What Factors Make the Difference in Growth at Regional Level?

This paper examines income convergence across Europe during the period 1995-2007 where the last enlargement of the EU and the process of economic integration was in active progress. It is generally accepted that the enlargement of the EU has been followed by the convergence of late comers toward the European average. The author focuses on only the cross-county convergence, but also within-country convergence. He concluded that the remarkable cross-country convergence has tended toward within-country divergence, particularly for Central and Eastern European Countries during the enlargement period. Economic weights of the respective regions in national economies seem to be critical in explaining within-country divergence. High income regions, mostly capital cities, in CEECs are characterized particularly by higher growth rates. It is highly probable that the economic integration has favored those well-off regions at the expense of regions remote from their capitals. This tentative conclusion provides important policy implications not only for European integration, but also for economic integration in other regions, where countries have been seeking diverse regional trade agreements (RTA). Economic integration is largely recognized as a policy option to boost economic growth through trade and investment channels, but economic benefits are likely to be concentrated in certain favored regions, mostly capital regions or industrial areas which have already been enjoying high income levels. Thus, it will be increasingly necessary to develop a mechanism to channel economic benefits to backward regions for within-country convergence.

Intra-industry trade in an enlarged Europe : trend of intra-industry trade in the European Union and its determinants

In this paper I examine the evolution of intra-industry trade (IIT) in intra-European trade in the period of accession of the Central and Eastern European countries (CEEC). In order to identify changes in IIT in intra-European trade, I calculate the Grubel and Lloyd index for the static dimension and Brulhart A index for the dynamic dimension. Based on Grubel and Lloyd index, I conduct gravity-type empirical tests to verify determinants of IIT at the intra-European level. I find that CEECs experienced considerable increase in IIT, particularly during transitional periods before their accession. However, the level of IIT between CEECs is still considerably low. Given that a trade-investment nexus exists to explain IIT in intra-European trade, IIT in CEECs can increase further, as they receive more FDI from their neighbors.

The EU's FTA Strategies in Its New Trade Policy Initiatives and Policy Implications

Beginning with the Global Europe Initiative in 2006, the EU has conducted active trade policy measures to contribute to economic growth, job creation and social cohesion in the European community. Comprehensive and high-leveled bilateral FTA initiatives, among others, have rapidly emerged as a major tool of the new trade policy to achieve such goals. More than a decade has passed since the Global Europe Initiative was declared. In the meantime, the EU successfully established several new generational FTAs with the Republic of Korea, Singapore, Vietnam and others, despite harsh economic turmoil led by global and European financial crises, the Greek crisis, Brexit, etc. This paper aims to illuminate how the goals of the new trade policy have been achieved through the EUs FTA strategies over the years since the Global Europe Initiative. To do this, we focus on three topics: EU standards, the evaluation process of market openness and the global value chain (GVC). In other words, we will evaluate how much the EUs FTA strategies have contributed to achieving globalization of EU standards, job creation through careful evaluation processes, and economic growth of the community by utilizing GVCs.Beginning with the Global Europe Initiative in 2006, the EU has conducted active trade policy measures to contribute to economic growth, job creation and social cohesion in the European community. Comprehensive and high-leveled bilateral FTA initiatives, among others, have rapidly emerged as a major tool of the new trade policy to achieve such goals. More than a decade has passed since the Global Europe Initiative was declared. In the meantime, the EU successfully established several new generational FTAs with the Republic of Korea, Singapore, Vietnam and others, despite harsh economic turmoil led by global and European financial crises, the Greek crisis, Brexit, etc. This paper aims to illuminate how the goals of the new trade policy have been achieved through the EUs FTA strategies over the years since the Global Europe Initiative. To do this, we focus on three topics: EU standards, the evaluation process of market openness and the global value chain (GVC). In other words, we will evaluate how much the EUs FTA strategies have contributed to achieving globalization of EU standards, job creation through careful evaluation processes, and economic growth of the community by utilizing GVCs.

Recent Development of Labor Mobility in the EU: Comparative Study on the British and German Cases

A new trend of labor mobility has been emerging amid the varying economic conditions among EU members. Since the global financial crisis there have been diverging trends in labor market conditions in Europe. The unemployment rate in Southern Europe still remains at its record high, while Northern Europe maintains a relatively stable employment figure. Such diverging labor market conditions have been reflected on the labor movement within the EU. Countries such as Germany and the UK attract more immigrants to their job markets, while southern countries become ‘net exporters’ of their labor to other parts of Europe.A number of studies conclude that labor mobility within the EU is determined by income differences between the migrant departing and hosting countries. The distinctive business cycles between countries (i.e. unemployment gaps) are insufficient for explaining the intra-European labor movement. These empirical facts were well spotlighted under the arguments of an optimal currency area (OCA); the lack of labor mobility within the Euro area suggests that it is far from being qualified as an OCA. It was hardly expected that labor mobility would work as an ‘absorber’ in the face of asymmetric shocks. However, recent observations show that internal migration within the EU has been increasingly affected by the difference in unemployment rates between countries.

Harmonizing Social Welfare and Economic Growth: Case Studies of European Countries and Implications for Korea

Welfare spending continues to garner a bigger chunk of the national budget in Korea. This has become a key economic issue attracting much public attention. Fiscal conservatives call for tighter controls on welfare spending, while some are calling for greater welfare spending in order to temper the effects of economic polarization. In this context, this paper analyzes relation between level of welfare spending and economic growth and proposes some conditions to create welfare system in favor of economic growth. Beyond quantitative analyses, the paper reviews reforms in welfare policy in Sweden, Denmark, Germany and Netherlands in order to understand how these countries have reacted to domestic and external challenges in their welfare system. Through economic analysis and case studies, the paper draws following policy implications for Korea. First, it is necessary to maximize existing welfare policy, but also develop ways to raise taxes in a growth-friendly manner. Second, it is highly recommended to create an atmosphere conducive to policy innovation. Third, it is necessary to establish growth-oriented welfare regimes with a special focus on strengthening human capital and employment rates.

Reforms in Economic Governance of Eurozone after the Debt Crisis and Lessons for Korean Economy

This study analyzes the causes of the European debt crisis and reviews reforms the eurozone has pushed for in order to solve the crisis. It also focuses on the future prospect of economic governance of the eurozone. European debt crisis has spread over the entire eurozone despite the bail out of Southern European countries. Greece, Ireland, and Portugal were bailed out and since the second semester of 2011, Italy and Spain have been under the pressure of a potential debt crisis due to their soaring bond yield rate. During the early period of the crisis, the eurozone focused on providing liquidities to Greece. However as the crisis affected other countries one after another, eurozones responses have become more comprehensive, recognizing that the crisis is related to insolvency beyond liquidity crisis.

Prospects and Implications of a US-EU FTA

Ever since the 1990s, there has been a stream of unofficial studies and reviews discussing the possibility of a US-EU FTA. The average tariff rates for manufactured goods, however, in the US and EU are each a mere 2.0% and 2.4%, and both possess largely open economies. In this context it was generally accepted that a FTA between two parties would not bring about impact in terms of export growth. Accordingly, the US and EU have been concentrating on pursuing FTAs with emerging countries. In trade relationships with developed countries they have, meanwhile, focused on abolishing non-tariff barriers; they continued to discuss on liberalization in services and initiated several regulatory cooperations by industry, rather than on comprehensive FTAs. Key achievements in bilateral cooperation between the two sides are the US-EU MRA (1998), the EU-US Open Skies Agreement (2007) and the formation of consultative groups on different issues and industries under the auspices of the Transatlantic Economic Council. Industrial circles from both sides have from time to time brought up the necessity of a US-EU FTA, but the feasibility of an actual agreement has been considered low. However, the global financial crisis and the European debt crisis have led to the develop-ment of economic and political contexts that support the cause for a comprehensive FTA between the two economies. Such changes can be discussed in both internal and external contexts.