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  • KDI Journal of Economic Policy, August 2019
  • Date August 31, 2019
  • Language English
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    Pyramidal Business Groups and Asymmetric Financial Frictions / Duksang Cho
     Ⅰ. Introduction
     Ⅱ. A Heterogeneous Agent Model with Occupational Choices
     Ⅲ. Financial Frictions and Three Types of Firms
     Ⅳ. A Matching Rule and a Stationary Equilibrium
     Ⅴ. Remarks on the Model
     Ⅵ. A Numerical Example of the Model
     ⅦI. Concluding Remarks and Future Research
     REFERENCES

    Easier Set Than Done: Stakeholder Engagement as Public-Private Partnership in Regulatory Policy of South Korea / Jongyearn Lee
     Ⅰ. Introduction
     Ⅱ. Existing Debates and Discussions
     Ⅲ. Evaluating Stakeholder Engagement in Regulatory Policy of South Korea
     Ⅳ. Measures to Enhance Regulatory Effectiveness in View of Public Private Partnerships
     REFERENCES

    International Trade and Directed Technical Change in Developing Countries / Minho Kim
     Ⅰ. Introduction
     Ⅱ. The Model
     Ⅲ. Endogenous Technical Change
     Ⅳ. Equilibrium Analysis
     Ⅴ. Concluding Remarks
     REFERENCES
Pyramidal Business Groups and Asymmetric Financial Frictions / Duksang Cho

Given capital market imperfections, an entrepreneur can alleviate financial frictions by creating a pyramidal business group in which a parent firm offers its subsidiary firm internal finance. This endogenous creation of pyramidal business groups can beget asymmetric financial frictions between business-group firms and stand-alone firms. I build a model to show that these asymmetric financial frictions can have sizable effects on resource allocation. On one hand, the financial advantage of pyramidal business groups can foster productive firms by incorporating them as subsidiaries. On the other hand, the asymmetrically large amount of external capital controlled by pyramidal business groups can be expended by unproductive business-group firms and push up the equilibrium price of capital. The model suggests that with fine investor protection or low financial frictions, the benefits of pyramidal business groups can be dominated by their costs because the probability of fostering productive subsidiaries diminishes as the efficiency of external capital markets improves, while the prevalence of pyramidal business groups is not attenuated due to their continuing asymmetric financial advantage.

Easier Set Than Done: Stakeholder Engagement as Public-Private Partnership in Regulatory Policy of South Korea / Jongyearn Lee

An emphasis on public-private partnership (PPP) in the regulatory policy process can overcome the challenges hindering regulatory effectiveness with the emergence of fast developing technologies and new industries. This study attempts to evaluate quantitatively different aspects of institutional settings of South Korean regulatory policy in terms of stakeholder engagement as PPP, using evidence-based data released by the OECD. From the results of the principal component analysis, South Korea can be evaluated as being at a very good level overall in its institutional establishment. Nevertheless, the fact that the outcome of regulatory reforms in South Korea is still insufficient compared with this well-established system suggests that the country should concentrate on improving system operation. Consequently, this study makes policy suggestions to improve regulatory effectiveness through PPP by supplementing the facets that are well-equipped but not feasible with respect to regulatory policy cycle, regulatory governance, regulatory method, and conflict resolution

International Trade and Directed Technical Change in Developing Countries / Minho Kim

This paper examines the relation between the skill premium and international trade given differences in the relative supply of skills across countries while allowing the South (developing countries) to develop its appropriate technology. Typical assumptions put forward in the literature state that either technology is exogenously given, or technical change is allowed only in the North (developed countries). I present a model of international trade with endogenous growth by allowing the South to direct its technology. The results show that more R&D is directed towards skill-augmenting technology in the North than in the South, in sectors with the same skill-intensity. Technical change induced by lowering trade costs can increase the skill premium in both the North and the South. This result can explain the empirical observation that the skill premium has increased within many developing countries after they experienced trade liberalization. Finally, the model predicts larger gains from trade compared with the model where technical change is either not allowed, or allowed only in the North.
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    Given capital market imperfections, an entrepreneur can alleviate financial frictions by creating a pyramidal business group in which a parent firm offers its subsidiary firm internal finance. This endogenous creation of pyramidal business groups can beget asymmetric financial frictions between business-group firms and stand-alone firms. I build a model to show that these asymmetric financial frictions can have sizable effects on resource allocation. On one hand, the financial advantage of pyramidal business groups can foster productive firms by incorporating them as subsidiaries. On the other hand, the asymmetrically large amount of external capital controlled by pyramidal business groups can be expended by unproductive business-group firms and push up the equilibrium price of capital. The model suggests that with fine investor protection or low financial frictions, the benefits of pyramidal business groups can be dominated by their costs because the probability of fostering productive subsidiaries diminishes as the efficiency of external capital markets improves, while the prevalence of pyramidal business groups is not attenuated due to their continuing asymmetric financial advantage.

  • Read more

    An emphasis on public-private partnership (PPP) in the regulatory policy process can overcome the challenges hindering regulatory effectiveness with the emergence of fast developing technologies and new industries. This study attempts to evaluate quantitatively different aspects of institutional settings of South Korean regulatory policy in terms of stakeholder engagement as PPP, using evidence-based data released by the OECD. From the results of the principal component analysis, South Korea can be evaluated as being at a very good level overall in its institutional establishment. Nevertheless, the fact that the outcome of regulatory reforms in South Korea is still insufficient compared with this well-established system suggests that the country should concentrate on improving system operation. Consequently, this study makes policy suggestions to improve regulatory effectiveness through PPP by supplementing the facets that are well-equipped but not feasible with respect to regulatory policy cycle, regulatory governance, regulatory method, and conflict resolution

  • Read more

    This paper examines the relation between the skill premium and international trade given differences in the relative supply of skills across countries while allowing the South (developing countries) to develop its appropriate technology. Typical assumptions put forward in the literature state that either technology is exogenously given, or technical change is allowed only in the North (developed countries). I present a model of international trade with endogenous growth by allowing the South to direct its technology. The results show that more R&D is directed towards skill-augmenting technology in the North than in the South, in sectors with the same skill-intensity. Technical change induced by lowering trade costs can increase the skill premium in both the North and the South. This result can explain the empirical observation that the skill premium has increased within many developing countries after they experienced trade liberalization. Finally, the model predicts larger gains from trade compared with the model where technical change is either not allowed, or allowed only in the North.

 
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The Department of Macroeconomics is conducting researches on the macro economy and macroeconomic policy, particularly focusing on suggesting the analysis of macroeconomic trends and current status of the economy at home and abroad, the economic forecast, and the policy direction of the macro economy. The Department is also in charge of establishing, sustaining and maintaining various econometric models, based on which it analyses policy effects and develops a long-term economic forecast.

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