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The Dynamism, Internationalization and Structural Change of the Korean Industries

Author Woojin Youn, Sung Keun Park, Inhwan Jung Date 2014.12.29 Page 209
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The Korean economy is characterized by rapid industrialization and internationalization. The purpose of this study is to take a comprehensive look at structural changes of Korean industry in terms of productivity, export sophistication and global value chains. The study uses a comparative study for a panel of countries to identify where the Korean economy is headed in the global market.
Chapter 2 examines the structural change of labor productivity during the period of industrialization using the GGDC 10-sector database. The structural change bonus and burden hypotheses are tested by applying the three-factor decomposition method. It finds that Korea has rapidly shifted from a structural change bonus to a structural change burden. The result suggests that Korea needs a more balanced productivity increase between manufacturing and
services.

Chapter 3 compares Korea’s export performance and sophistication to those of the US, Japan and China using the BACI trade database. The product space approach is applied to visualize the export structure of the four countries. The product complexity and network centrality indices are calculated to compare the level of export performance. It reveals that following the US and Japan, Korea and China have formed a cluster in the core industries. The results also suggest that Korea and notably, China, have converged towards the US and Japan at a fast pace.

Chapter 4 conducts international input-output analysis using the WIOD database. It investigates the value added structure of exports, the evolution of global value chains and the linkages across global industries. The newly-developed decomposition method is widely used to extract value added components of total exports. The decomposition results show that Korea and China have weakened positions in the global market in terms of value added contribution.
Industrial linkages between Korea and China are found to have become ever closer over the past fifteen years.

Chapter 5 summarizes main findings of the report and proposes some policy directions.