As the global economy becomes more integrated or intertwined, one nation’s economic risks tend to spread fast and widely at an unprecedented pace. Networks become more tightly connected, demanding a new economic development paradigm for co-existence and co-prosperity, not for individualistic survival. Now that the two rounds of global economic crisis stemming from the US and Southern Europe have increased uncertainties, both internally and externally, KDI has put in enormous efforts to find a new growth path and propose policy alternatives in advance which could help the Korean economy take a leading role in the post-crisis period. Furthermore, while strengthening its ability to respond to macroeconomic crisis, it also has worked to develop a future strategy that could actualize welfare society, balanced growth and economic democracy so as to build a robust economic structure. The institute has produced comprehensive studies based on its in-depth analyses on Korea’s economic, political, social and future conditions in order to find its new growth engine and solve pending problems, such as mounting household debts, increasing income insecurity among the low-income class and slowing potential growth resulting from population aging.
KDI has endeavored to introduce comprehensive mid- to long term policy measures to foster sustainable growth and at the same time, strengthen capabilities in microeconomic research, innovation and improving market structures. In addition, in order to incorporate economic efficiency and balanced distribution, KDI is working to strengthen fiscal productivity. Meanwhile, to approach socio-economic problems such as education and housing in an economic perspective, KDI strongly supports collaborative research with not only other research institutes in Korea but with international organizations such as the World Bank and OECD, thus internationalizing its research efforts.
In 2001, KDI conducted a collaborative study called Vision 2011 with 16 other research institutes, academic units and civic groups, which presented the challenges ahead for the Korean economy. What resulted was a publication entitled, Vision 2011: Open Society, Flexible Economy. In 2004, KDI published Dynamic Korea: a Nation on the Move, in light of the International Conference on New Vision and Strategy under Changing Leadership in Northeast Asia. Aims such as balanced growth and distribution, social cohesion, and voluntary participation are the underlying foundation for the new participatory government. This publication contains policy directions that will put Korea on the right track to establish an internationalized advanced economic system and to become an economic hub of Northeast Asia.
KDI will also focus its research capability on projects such as productivity of the public expenditure management system and a competitive financial services industry through the elimination of the gap between financial markets
Under the newly-elected government, KDI took part in the seventh Five-year Plan in 1992, and began formulating the Five-year Plan for the New Economy in 1993. However, as this plan remained a tentative paper plan without a follow-up implementation framework, the series of Five-year Plans over the past several decades came to an end. For the second collaborative study with Harvard Institute of International Development (HIID), KDI conducted another study on Korea's economic growth experiences starting in the mid-1970's and published a three-volume series on Korea's socio-economic development process. To commemorate the 50th anniversary of Korea's Liberation, KDI published a research report both in Korean and English that covered all the major economic issues of Korea over the past five decades.
In the midst of worldwide globalization, the domestic financial sector was dealing with reform measures such as liberalization and financial market development. KDI continued studies in these topics and played a significant role in the activities of the Financial Reform Committee established in January 1997, and as an output the Committee published Report on Comprehensive Financial Reform in December 1997. Based on studies of these economic issues and experiences of long-term economic development plans, KDI published Comprehensive Measures for Overcoming Economic Crisis and Structural Reforms in April 1998, thereby providing various policy instruments for overcoming the economic crisis. In this study, critical issues and appropriate action plans for structural reforms were presented. In general, following the financial crisis, KDI's research topics have expanded to address a broader range of issues in the national economic system.
During the 1980's, KDI's research direction changed in response to the changes Korea was undergoing in its social and economic sectors. The concentration of economic power on business conglomerates intensified and its related problems expanded to become socio-political problems. This prompted researchers at KDI to identify the existing structural problems and respond with appropriate policy measures. These efforts formed the basis for the revision of the Fair Trade Act in 1986, which intended on establishing an appropriate legal system to reduce and deter economic concentration.
In response to increasing interest in social issues and related policies, KDI reviewed and studied ways to refurbish basic statistics over a wide range of areas including population, employment, culture, gender issues and the environment, thereby contributing to a significant expansion and improvement of the social index system. Regarding the National Pension System, KDI provided the basis for its introduction by providing an appropriate operational scheme, associated administrative structures, and by analyzing its socio-economic effect.
KDI initiated studies on the North Korean economy in order to correctly understand its economic situation and the prospects of economic cooperation between South and North Korea during the 1980's. On international trade policy, KDI pointed out that domestic protection measures through tariff and non-tariff barriers hampered international competitiveness of domestic industries, and proposed a reform of the tariff structure centered on a uniform tariff rate, as well as import liberalization.
For the agricultural sector, KDI proposed a non-farm income increase plan by forming Industrial Complexes in rural areas, thus establishing the basis for legislation of the Law on Farming & Fishing Households Development Promotion and the formation of nationwide rural industrial complexes.
As for public corporations, KDI studied issues related to enhancing their efficiency and privatization, which played important roles in the development and legislation of their management accountability system.
The long-term economic development of Korea has always been the main research concern of KDI. In 1985, KDI implemented a collaborative research project titled Prospects of the Korean Economy in 2000 with 11 other public research institutes. In 1988, KDI served as a steering research institute for the Economic Restructuring Consultative Council, a presidential.
KDI was founded in 1971 in recognition of the need for a think tank that researches economic policy issues concerning Korea in both systematic and applicable ways, and assists the government in formulating the "Five-year Economic Development Plans" and related policies. KDI research fellows took part in the formulation and support of not only the five year plans but also the three-year rolling plans and yearly economic management plans. They also conducted short-term research projects to evaluate current economic policy issues and frequently held policy discussions and conferences. KDI also analyzed the long-term economic prospects for Korea and published its results in Long-term Socio-economic Development during 1977~91. Apart from its contribution to economic policy formulation, KDI also contributed to laying the foundation for economic research on Korea. In collaboration with the Harvard Institute of International Development (HIID), KDI studied 30 years of socio-economic development in Korea from its liberation in 1946 to the mid-1970's, and published the results in a ten-volume series in both Korean and English titled, The Economic and Social Modernization of the Republic of Korea. This comprehensive research study has become a valuable reference for economists, policymakers, and both domestic and foreign economic-related organizations.
KDI has continuously implemented extensive policy-oriented research in the areas of macroeconomics, public finance, monetary and financial economics, industrial organization and international trade, which are all directly related to economic development. In addition, social welfare issues, which have recently attracted considerable attention in Korea, were also analyzed by investigating valuable policy lessons from the experiences of advanced economies. Fundamental studies in social welfare systems such as health insurance, industrial accident insurance, pension and retirement funds, unemployment insurance, as well as studies and experimental research on income distribution topics, including absolute poverty, were performed. Social indicators used in advanced countries were modified to ensure their suitability in Korea by establishing appropriate definitions and measurement methods. This contributed to the publication of Korea's Social Index by the Division of Survey and Statistics of the Economic Planning Board.