Trade, Reform, and Structural Transformation in South Korea

56 Pages Posted: 11 Jul 2016

See all articles by Caroline Betts

Caroline Betts

University of Southern California - Department of Economics

Rahul Giri

Centro de Investigación (CIE), Instituto Tecnológico Autónomo de México (ITAM); International Monetary Fund (IMF)

Rubina Verma

Instituto Tecnológico Autónomo de México (ITAM) - Administracion

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2016

Abstract

We develop a two country, three-sector model to study the effects of trade policies for Korean structural change from 1963 through 2000. The model features Armington trade, import tariffs, and export subsidies. Tariff liberalization increases imports and total trade, especially agricultural imports, intensifying Korean industrialization. Subsidy liberalization lowers exports and trade, especially industrial exports, attenuating industrialization. These effects of policy reform are individually powerful, but offset each other. Relative to a “no reform” regime which maintains 1963 tariff and subsidy rates forever, observed trade reform produces comparable but lower trade volumes, a larger agricultural and lower industrial employment share, and slower industrialization. “Complete reform”, lowering tariffs and subsidies to zero from 1963 onwards, substantially increases trade volumes and facilitates industrialization.

Keywords: Trade policy, comparative advantage, industrialization, and structural change

JEL Classification: F13, F14, F43, O14, O41

Suggested Citation

Betts, Caroline M. and Giri, Rahul and Verma, Rubina, Trade, Reform, and Structural Transformation in South Korea (June 1, 2016). USC-INET Research Paper No. 16-20, Available at SSRN: https://ssrn.com/abstract=2808083 or http://dx.doi.org/10.2139/ssrn.2808083

Caroline M. Betts (Contact Author)

University of Southern California - Department of Economics ( email )

KAP 300
Los Angeles, CA 90089
United States
213-740-2430 (Phone)

Rahul Giri

Centro de Investigación (CIE), Instituto Tecnológico Autónomo de México (ITAM) ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10370
Mexico

HOME PAGE: http://ciep.itam.mx/~rahul.giri/

International Monetary Fund (IMF)

Kuwait

Rubina Verma

Instituto Tecnológico Autónomo de México (ITAM) - Administracion ( email )

Mexico City, DF 01000
Mexico

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