How did Korea Overcom e Middle Dr. Income Trap? Choi Byung-il Korea Economic Research Institute Oct. 21, 2013
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Middle Income Trap
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Middle Income Trap and Economic Freedom
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Case of Korea
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Korea Economic Research Institute
Middle Income Trap Politics overtakes economics
Stakeholders claim for more slices of the pie
Populism
A zero-sum game of redistributive politics Rent seeking activities become rampant
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Korea Economic Research Institute
Middle Income Trap ď ś GDP per capita and Economic Freedom World Index in 2010 High Income Countries Middle Income Countries Low Income Countries
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Korea Economic Research Institute
Middle Income Trap ď ś Middle-Income Trap: Per Capita Incomes Relative to the U.S.
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Korea Economic Research Institute
Middle Income Trap and Economic Freedom Income level(GDP per capita) and Economic Freedom are highly correlated: Property Rights : 0.808 Freedom from Corruption : 0.822 Business Freedom: 0.763 Trade Freedom : 0.721
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Korea Economic Research Institute
Middle Income Trap and Economic Freedom ď ś
Empirical result: Effect of Economic Freedom Index on GDP per capita (2001-2010) VARIABLES
Property Rights Freedom from Corruption Fiscal Freedom Government Spending Business Freedom Labor Freedom Monetary Freedom Trade Freedom Investment Freedom Financial Freedom Constant Observations R-squared
(1) lnrgdpl2 0.0127*** (0.00302) 0.00882** (0.00345) -0.000501 (0.00326) -0.00549*** (0.00186) 0.00584*** (0.00331) 0.00245 (0.00190) -0.00426 (0.00523) 0.0243*** (0.00280) 0.00213 (0.00250) -0.000792 (0.00231) 6.485*** (0.450) 318 0.807
(2) lnrgdpl 0.0127*** (0.00302) 0.00889** (0.00346) -0.000395 (0.00326) -0.00550*** (0.00186) 0.00576*** (0.00331) 0.00245 (0.00190) -0.00427 (0.00523) 0.0244*** (0.00280) 0.00218 (0.00250) -0.000870 (0.00231) 6.476*** (0.450) 318 0.807
(3) lncgdp 0.0116*** (0.00298) 0.00987*** (0.00340) -0.000281 (0.00321) -0.00528*** (0.00183) 0.00615*** (0.00326) 0.00250 (0.00187) -0.00903* (0.00515) 0.0255*** (0.00275) 0.00252 (0.00246) -0.000709 (0.00227) 6.773*** (0.443) 318 0.812
(4) lncgdp2 0.0111*** (0.00294) 0.0101*** (0.00336) -1.24e-05 (0.00317) -0.00532*** (0.00181) 0.00578*** (0.00322) 0.00269 (0.00185) -0.00921* (0.00509) 0.0252*** (0.00272) 0.00260 (0.00243) -0.000627 (0.00224) 6.829*** (0.438) 318 0.812
Note: T-statistics are reported in parentheses. Those followed by *** are statistically significant at the .01 level, ** at the .05 and * at the .01 level. All entries are rounded to the nearest decimal.
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Korea Economic Research Institute
Middle Income Trap: Winners and Losers ď ś Cross country comparison US$3000 as threshold for middle-income countries.
Source: Aiyar et al (2013)
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Korea Economic Research Institute
Case of Korea: Overcoming Middle Income Trap ď ś Trend of GDP per capita of Korea
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Korea Economic Research Institute
Case of Korea ď ś Democratization of 1987 : Strong demand for equity
Strike by Korean Broadcasting System (1990)
Strike by Hyundai Heavy Industry (1990)
General strike by labor unions (1996)
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Korea Economic Research Institute
Case of Korea ď ś Korea’s global orientation: Powerful countervailing force
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Korea Economic Research Institute
Case of Korea ď ś Business Freedom, Trade Freedom: Key to overcome MI Trap
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Korea Economic Research Institute
Case of Korea: Implication for Korea Now ď ś Challenge for being a stable advanced economy Institutionalizing Conflict Management System
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Korea Economic Research Institute
Case of Korea: Implication for Korea Now
Rising Populism
Weakening Global Orientation
Inward-looking Attitude
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Korea Economic Research Institute