The Reduced Impact of Exports on Korea’s Economic Growth: A Demand-side Approach

Jong-seok Oh (ojs@kiet.re.kr), Sung Wook Hong (swhong@kiet.re.kr) and Duyong Kang (dykang@kiet.re.kr)
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Jong-seok Oh: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr
Sung Wook Hong: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr
Duyong Kang: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr

No 18/2, Occasional Papers from Korea Institute for Industrial Economics and Trade

Abstract: After the global financial crisis, both export growth and economic growth have trended downward, while exports’ contributions to percentage change in GDP fell off markedly after 2011. For this study, we adopted an export multiplier approach by which exports’ indirect effects on the domestic economy via other elements of GDP, such as consumption, investments, and imports, can also be considered. The results of this study suggest that the importance of export-driven growth is declining, and that the trickle-down effect long regarded as the crucial mechanism powering Korean economic growth is currently malfunctioning. On top of that, due to external conditions, such as emerging global protectionism and the slowdown of the Chinese economy, many economists are warning that it is likely that the Korean economy will face unfavorable conditions and expect a slowdown in export performance. In this new, alien economic environment, the kinds of policies that once buttressed the export-led growth strategy of the halcyon days require immediate revision.

Keywords: exports; export growth; export policy; trickle-down effect; trade policy; industrial policy; industrial strategy; income-led growth; income inequality; demand-driven growth; growth policy; consumption; export multiplier; growth strategy (search for similar items in EconPapers)
JEL-codes: D63 F01 F13 F14 F43 H31 J30 J31 J38 O11 O43 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2018-10-18
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kietop:2018_002

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