This collection of conference papers is an accumulation of materials from “The 20076 KDI-KAEA Conference on Enhancing Productivity and Sustaining Growth” held on July 9August 8, 20076 at the Korea Development Institute (KDI) in Seoul, Korea.

The purpose of this conference was to gather papers that are in-line with the KDI’s 20076 major research agenda such as Productivity Growth, Economic Integration and FTA, Foreign Ownership and Firm Size and Corporate Performance, Macroeconomic Issues, Tax Reform, and Financial Market Issues. TTrade and FDI Issues, Productivity, Financial and Fiscal Reforms, and Others. While the first year’s joint conference in 2003 invited only experts from KDI and KAEA, this year’s conferences were open to both domestic and international academia and professional circles. his year’s 5th KDI-KAEA Conference holds a great meaning, in particular, because as of 2006 Korea Development Review has been listed at the Korea Research Foundation, a national organization dedicated to social and scientific development through the promotion of scientific research. In addition, the Editorial Board of the Review is currently putting its effort to have the publication enlisted on the Social Science Citation Index, as well. IIt is our hope that the conference provided a venue to exchange ideas on the future policy direction for Korea to leap into the league of advanced economies in the near future. Currently, most of the papers presented during the conference are in review process for publication in the Korea Development Review.

The conference had 6 sessions. Session I- Issues of Productivity GrowthTrade and FDI Issues; Session II-Economic Integration and FTAR&D and Productivity Growth; Session III-EForeign Ownership and Firm Size and Corporate Performancenterepreneurship and Business Practice Engineering; Session IV-BMacroeconomic Issuesank Capital Regulation and Lending Practices; Session V--STax Reformtock Ownership Structure and Exchange Rate Policy; Session VI-SFinancial Market Issuesectoral Shifts and Entry Regulation. This volume comprises of papers that have already been revised by the authors by reflecting the pertinent discussion notes, which are also included in the proceedings. Furthermore, the discussion notes have contributed substantial amount of input into the original papers.

CHAPTER 1-1
Current Issues of Productivity Growth in Korea: A Survey

I. Introduction
II. The Effect of Industrial Policy on Productivity Change in Korea
III. The Effect of Information Technology on Productivity Change in Korea
IV. Low Productivity in Services and Agricultural Sectors
VI. Conclusion
References
Comments on “Current Issues of Productivity Growth in Korea: A Survey”

 

CHAPTER 1-2
Optimal R&D Intensity: Welfare Analysis

I. Backgrounds
II. Economic model and empirical analysis
III. Results from the Calibration Model
IV. Summary and limitations
Reference

 

CHAPTER 2-1
Integration and Growth in East Asia

I. Introduction
II. Cross-country Analyses of Economic Growth
III. Micro-Data Analyses of Economic Growth
IV. Concluding Remarks
References
Comments on “Integration and Growth in East Asia”

 

CHAPTER 2-2
Vertical Intra-Industry Trade (VIIT) and Foreign Direct Investment(FDI): In Case of Automobile Component Industry of China, Japan and South Korea

I. Introduction
II. Backgrounds and Overview
III. Objectives and Methodology
IV. Changing Trade Patterns in Automobile Industry
V. National Competitiveness in Components for Japan, South Korea and China
References

 

CHAPTER 2-3
A Political-Economy of the Free Trade Agreement : Temporal and Distributional Effect

I. Introduction
II. Literature
III. The Model
IV. Empirical analysis
V. Conclusion and Policy Implications
References

 

CHAPTER 3-1
Foreign Ownership and Corporate Performance

I. Introduction
II. Foreign Equity Investments and Shareholder Activism
III. Data and Descriptive Statistics
IV. Empirical Results
V. Summary and Conclusions
References
Comments on “Foreign Ownership and Corporate Performance”

 

CHAPTER 3-2
Boundary and Efficiency of Internal Capital Markets and Organizational Structure in Spin-offs: Control vs. Focus

I. Data Collection and Empirical Methodology
II. Investment and Efficiency of Internal Capital Market
III. Market Performance around Corporate Spin-offs
IV. Summary and Conclusions
Refereences
Comments on “Boundary and Efficiency of Internal Capital Markets and Organizational Structure in Spin-offs: Control vs. Focus”

 

CHAPTER 4-1
Effects of Sectoral Shifts on Average Duration Unemployment

I. Introduction
II. Sectoral Shifts of Labor Demand and Average Duration of Unemployment
III. Technical Progress and Female Workers’ Labor Force Attachment
IV. Conclusion
References
Comments on “Effects of Sectoral Shifts on Average Duration Unemployment

 

CHAPTER 4-2
Dynamics of Inflation Rate: Comparison of New Keynesian Models via Simulated Density

I. Introduction
II. The Model
Comments on “Dynamics of Inflation Rate: Comparison of New Keynesian Models via Simulated Density”

 

CHAPTER 4-3
ECM Threshold Co-integration Tests and Nonlinear Monetary Policy in Korea

I. Introduction
II. Background and Testing Issues
III. New Testing Methodology
IV. Empirical Results
V. Conclusion
References
Comments on “ECM threshold Co-integration Tests and Nonlinear Monetary Policy in Korea”

 

CHAPTER 5-1
Public Finance, Ethics and Tax Evasion: A Comparative Study of China, Japan and Korea

I. Introduction
II. The Present Study
References

 

CHAPTER 5-2
Welfare Effects of Tax Reform: Case of Korea

I. Introduction
II. Model
III. Solution Method
IV. Calibration
V. The Effects of Tax Reforms
VI. Conclusion
References
Comments on “Welfare Effects of Tax Reform: Case of Korea”

 

CHAPTER 6-1
Uncovered Interest Parity Puzzle: Cross-sectional and Time-series Analysis

I. Introduction
II. The forward premium puzzle
III. Empirical findings
IV. Conclusion
References
Comments on “Uncovered Interest Parity Puzzle: Cross-sectional and Time-series Analysis”

 

CHAPTER 6-2
Tick Size, Market Structure and Trading Costs

I. Introduction
II. Data sources and error filters
III. Tick sizes and trading costs on the Korea Stock Exchange
IV. Projection of trading costs
V. Comparison of the spreads of KSE and NYSE stocks
VI. Summary and concluding remarks
References

 

CHAPTER 6-3
External Finance and Productivity Growth in Kora: Firm Level Evidence Before and After the Financial Crisis†

I. Introduction
II. Literature Review
III. Corporate Investment and Financing Patterns Before and After the 1997 Financial Crisis
IV. TFP Growth and Credit Allocation in Korean Manufacturing Industries
V. Regression Analyses and Empirical Results
VI. Summary and Concluding Remarks
References
Comments on “External Finance and Productivity Growth in Korea: Firm Level Evidence Before and After the Financial Crisis”