The Export Dynamism of Korea

Download or read book The Export Dynamism of Korea written by Woojin Youn and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Trade has been considered an important engine of growth, especially for developing countries. Japan provided a prototype model of a successful export-oriented economy during the second half of the twentieth century. For the past three decades, Korea has succeeded to a powerful trading nation, followed by China, which has emerged as the giant export factory in the global economy. A handful of other developing economies have also been attempting to become the next Japan or Korea.Recent trade studies have shifted perspectives of investigating the role of trade for economic growth from how much a country exports to what and how it exports. The argument is that the diversification of export basket and the quality of exporting goods, rather than the volume of exports, are better indicators of economic growth. Rich countries are rich because they produce and export more complex goods and services, while poor nations are poor due to the lack of sophistication of their production and exports structures. The orthodox approach to accounting for this distinction was to rely on the fundamental characteristics of the trading nations-namely, natural resources, labor, physical and human capital, and technology.The standard trade theory suggests that the changing structure of exports should reflect the changing factor endowments, and does not allow any artificial and self-reinforcing factors in the development process. The evolution of export dynamics, however, is more complicated than the conventional models predict. It is well known that learning by exporting and economies of scale from expanding overseas markets create market failures, affecting the pattern of specialization. Any firm's efforts to discover export opportunities and develop its own export capabilities provide information externalities to other potential firms, so that they can exploit that information without any cost.In this setting, factor endowments are less powerful in determining the changing structure of a country's comparative advantage across products. Instead, the evolving pattern of specialization has a large effect on its future path and thus affects the future growth of the economy. The higher the level of export sophistication becomes, the more likely economic growth is to be accelerated. The product-specific approach takes extensive advantage of metadata-data about data content-contained in the global trade data. A country's export dynamism is characterized by the diversity and ubiquity of the products, as well as the proximity between them. The diversity and ubiquity measures prove useful to evaluate the complexity of a country's productive structure. A collection of the proximity measures is used to visualize a network of products referred to as the product space.The next sections will be devoted to a comparative analysis of economic complexity and export capabilities for four nations, including the United States, Japan, Korea and China. Section 2 provides a brief overview of conceptual and theoretical background for the subsequent analysis. Section 3 compares the economic complexity for selected countries and evaluates the distribution of the product complexity for their exports. Section 4 compares the structures of the product space and evaluates export capabilities using both the comparative advantage index and the product complexity index for their products. The final section concludes and offers some policy implications.