A Study on the Role of Export Subsidies in Korea

Yoon Heo
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Yoon Heo: Ho-Seo University

Korean Economic Review, 1997, vol. 13, issue 1, 189-214

Abstract: The purpose of this study is to identify the role of export subsidies in economic development using the evidence from Korea. The unrestricted vector autoregression (VAR) model is used to analyze the interactive dynamic behaviors among exports, export subsidies, foreign exchange rates, and outputs in Korea during 1981-1992. The major findings of this study can be summarized as follows: First, export subsid-ies have positively contributed to the export growth in Korea during 1981-1992. Sec-ond, among different types of export subsidies, export facility installation financing (S2) stands out in its positive role for the promotion of exports. Lastly, export sub-sidies, more specifically export facility installation financing(S2) and long-run ex-port financing( S3) , have positively contributed to the growth of industrial production in Korea. The policy implication of the study is that the export incentives can still act as important tools to overcome the market imperfections in knowledge and risk even after a country achieved a certain degree of economic development.

Date: 1997
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