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Trade, Reform and Structural Change in South Korea

Caroline Betts, Rahul Giri and Rubina Verma

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a two country, three-sector model to quantify the effects of Korean trade policies for structural change from 1963 through 2000. The model features non-homothetic preferences, Armington trade, proportional import tariffs and export subsidies, and is calibrated to match sectoral value added data on Korean production and trade. Korea’s tariff liberalization increased imports and trade, especially agricultural imports, accelerating de-agriculturalization and intensifying industrialization. Korean subsidy liberalization lowered exports and trade, especially industrial exports, attenuating industrialization. Thus, while individually powerful agents for structural change, Korea’s tariff and subsidy reforms offset each other. Subsidy reform dominated quantitatively; lower trade, higher agricultural and lower industrial employment shares, and slower industrialization were observed than in a counterfactual economy with no post-1963 policy reform.

Keywords: Trade policy; comparative advantage; industrialization; structural change. (search for similar items in EconPapers)
JEL-codes: F13 F14 F43 O14 O41 (search for similar items in EconPapers)
Date: 2017-04
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