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Trade, Reform, And Structural Transformation in South Korea

Caroline Betts, Rahul Giri and Rubina Verma

MPRA Paper from University Library of Munich, Germany

Abstract: A two country, three sector hybrid model of structural change with distortionary government policies is used to quantify the impact of international trade and trade reform for industrialization. The model features Arming- ton motivated trade in agriculture and industry, and a novel representation of trade reform as a time sequence of import tariffs, export subsidies and lump sum government transfers of net tariff revenue. We calibrate our economy to data on South Korea and the OECD, inputting time series of country and sector specific labor productivity, tariffs and export subsidies which determine evolution of the effective pattern of comparative advantage. The model’s predicted reallocations of Korean labor from agriculture into industry and services from 1963 through 2000 are quantitatively similar to those in the data. Incorporating trade and measured Korean trade reform are both important for the accuracy of this predicted structural change, although interna- tional real income differences under non-homothetic preferences primarily determine trade and specialization patterns rather than comparative advantage. Counterfactually eliminating a) international trade b) interna- tional labor productivity differentials c) post 1967 Korean tariff reform and d) post 1967 industrial export subsidy reform increase the model’s SSE by 91 percent, 56 percent, 27 percent, and 62 percent respectively.

Keywords: Liberalization; comparative advantage; import price; industrialization; structural change (search for similar items in EconPapers)
JEL-codes: F1 F13 F14 F4 F43 O14 O41 (search for similar items in EconPapers)
Date: 2013-07-31
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: Trade, Reform, and Structural Transformation in South Korea (2017) Downloads
Working Paper: Trade, Reform, and Structural Transformation in South Korea (2017) Downloads
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