Previous studies analyzed the determinants of fertility primarily through empirical models that incorporate (i) opportunity costs and (ii) labor market conditions and drew policy conclusions within such frameworks. This study extends the conventional approach in an international comparison context to explain Korea's extremely low fertility rates by using multiple databases and a set of variables expected to be relevant in the Korean context. The empirical analyses on the new factors, such as expectations about future economic conditions, evolving social norms, political orientations, social conflicts, and fertility-related policies, show that (i) the traditional factors and new variables have a statistically significant effect on fertility, and (ii) the impact of the policy variables is generally substantial across the examined countries. Nevertheless, (iii) such factors cannot fully explain the sharp fertility decline in Korea, which indicates that conventional policy measures based on large-scale fiscal spending may be ineffective. By building on a theoretical explanation of policy ineffectiveness through the lens of social norm models, we suggest redesigning fiscal policy combinations tailored to Korea's unique frictions (e.g., structural and sociocultural characteristics), as a promising strategy.
We introduce a general model of auctions involving two players. In this model, each player selects a monetary bid and an effort level; a general score function then combines these inputs to determine the winner. This framework unifies standard all-pay contests and winner-pay auctions by allowing a continuous tradeoff between effort and bidding. We prove the existence of a Nash equilibrium under mild technical conditions on the score function. In symmetric contests, we derive explicit expressions for equilibrium bids and efforts, which reveal how the degree of substitutability between effort and bidding influences strategic allocations. We characterize the equilibrium structure in asymmetric settings. Furthermore, we examine how complementarity between effort and bid inputs can amplify or attenuate competitive pressures. Our theoretical contributions include a constructive equilibrium solution in closed form and new insights into multi-dimensional bidding strategies under general score rules.
This study investigates whether real estate capital gains taxation contributed to moderating housing price increases during the COVID-19 era of monetary expansion. We use the sample of 29 out of the total OECD countries from 2012 to 2022 and estimate Generalized Method of Moments (GMM) models to examine the relationship between capital gains taxes and housing price dynamics. Findings suggest that although recent tax reforms and higher relative tax burdens on real estate were associated with lower housing price growth during the COVID-19 pandemic, the effects were conditional on liquidity conditions. We specifically find that as M1 expanded, the mitigating effect of capital gains taxes diminished and was generally offset in an environment with aggressive monetary expansion. This research contributes to the literature by identifying this conditional effectiveness, showing that capital gains taxation alone does not appear to offset liquidity-driven housing booms and may even amplify short-term volatility. Lastly, findings highlight the importance of fiscal-monetary coordination during future expansionary episodes.
This study contributes to the literature by estimating the net-oftax elasticity of taxable income (ETI) for top-income single taxpayers in Taiwan. Taiwan is a newly developed economy characterized by high tax noncompliance, the absence of tax treaties with major economies, a large underground economy, and a substantial gap between the top personal and corporate income tax rates. Using two-stage least squares (2SLS) and difference-in-differences (DID) approaches, we show that the ETI estimates for taxable income and gross income in response to the 2015 tax reform are substantially higher in Taiwan than the corresponding estimates documented for developed Western economies and Japan. Results also indicate that the ETI is largest for taxable income, moderate for gross income, and smallest for wage income. This pattern suggests that behavioral responses among top-income single taxpayers in Taiwan are driven primarily by tax avoidance, particularly through income shifting, instead of changes in labor supply or wage earnings. The analysis further shows that taxpayers' responses were strongest immediately following the reform but diminished over time. Lastly, the findings suggest that over longer adjustment horizons, taxable income becomes less sensitive (possibly because deductions and avoidance channels stabilize), whereas gross income continues to reflect gradual real behavioral adjustments.
This study investigates the determinants of happiness among North Korean defectors by analyzing the subjective and objective measures of social class. Using survey data of North Korean defectors living in South Korea, this study explores how social class before and after defection is associated with defectors' happiness. Results show that subjective and objective economic status in South Korea are positively associated with happiness, whereas higher pre-defection status (especially Workers' Party membership) is negatively associated with it. Defectors who perceived themselves as lower class in North Korea tend to report greater happiness post-defection. Findings suggest that improving material conditions alone may be insufficient to enhance the well-being of North Korean defectors.
This study analyzes the effect of government R&D grants on the performance of small and medium-sized enterprises using Korean firm-level data by employing a synthetic difference-in-differences (DiD) approach. Standard DiD models produce unreliable results due to the violation of the parallel trends assumption between the treatment and control groups. By contrast, the synthetic DiD model suggests that the parallel trends assumption is satisfied, and the estimated effect of government R&D grants on firms' sales is significant and positive. The grants also significantly increase employment and sales per employee, although they do not have a measurable impact on profitability.
The paper explores unemployment hysteresis in Asian countries. This paper collects annual unemployment data from various Asian countries over the period of 2003-2023, disaggregated by gender. Our empirical methodology includes trend analysis using graphical data representation and panel unit root tests with three groups: first-generation, second-generation, and variance ratio tests. Advanced unit root tests have ensured more reliable results. This paper shows that unemployment hysteresis is present in most Western and Central Asian countries, while it is largely absent in Eastern and Southern Asia. Policy implications are significant because they help identify the nature of unemployment in these countries and support the development of appropriate labor market policies.
This study examines why firms do not hire people with disabilities despite the mandatory quota and associated levy for unfilled quota. Departing from the conventional regression discontinuity design, we estimate the Tobit and Heckman selection models to explain a firm's quota compliance. The estimated parameters show firms above the size threshold are more likely to hire more individuals with disabilities. Considering the progressive levy rates for unfilled quota along with estimated marginal effects, we conclude that firms face sizable fixed costs associated with disability employment.
We propose a novel extension of the classical Solow growth model by embedding a production network structure among sectors. Unlike the traditional model, which treats productivity as a unique aggregate factor, this framework allows productivity to emerge from the structure of inter-sectoral linkages. Each sector produces using its own capital and inputs sourced from other sectors, introducing varying degrees of self-dependence and interdependence. The model captures how technological improvements or shocks in one sector propagate through the economy via input-output relationships, shaping aggregate productivity growth. Analytical derivations across diverse network topologies, which range from linear to complete networks, demonstrate that the structure of the production network plays a crucial role in determining long-run growth outcomes. Results show that network centrality, connection intensity, and self-dependence intensity significantly influence how shocks are diffused. Research highlights the non-linear, systemic effects of local productivity changes and suggests that growth is structurally embedded in the organization of production.
This study examines the relationship among unemployment, self-employment, and minimum wage changes in Korean regions from 2008 to 2023 using fixed effects, dynamic panel, and panel vector autoregressive (PVAR) models. We find that relatively high minimum wages reduce self-employment by increasing opportunity costs while also raising unemployment. Effects vary by region and type of self-employment-own-account workers are more vulnerable than employers, and metropolitan cities experience stronger labor market disruptions than provinces, where informal sectors absorb shocks. Although minimum wage increases initially discourage self-employment, our PVAR analysis indicates a gradual recovery of self-employment after three years, suggesting potential longterm entrepreneurial activity. Robustness checks using alternative measures of the minimum wage confirm the consistency of our findings. These findings highlight the need for minimum wage policies that consider regional labor market differences and support small businesses to mitigate adverse effects.
This study examines the impact of multilateral corporate tax cuts on the international location of firms and world growth rate. This research demonstrates that corporate tax cuts result in the relocation of firms from a capital-rich country, which is characterized by agglomeration, to a capital-poor country, which is not characterized by this tendency. In circumstances where the scale of firms leaving an agglomerated country for a non-agglomerated one is low, corporate tax cuts result in an increase in world growth rate. Conversely, when such relocation flows of firms are significant, corporate tax cuts lead to a decline in world growth rate.
This study estimates the quarterly potential GDP of Korea from 2012 Q1 to 2023 Q4 by using industry-level total factor productivity (TFP) data. By referring to the EU KLEMS classification and Fernald (2014), this study constructs a quarterly capital stock and TFP database for 17 industries and adjusts their labor and capital inputs with proxy variables, namely, the labor intensity index and the capacity utilization index. This study compares models with and without input adjustments and reveals a post-pandemic decline in labor productivity and a slow capital input recovery. The adjusted model shows significantly high TFP contributions, which highlights the importance of input adjustments for accurate TFP analyses and potential GDP estimates. The GDP gap is negative during the pandemic period. Although the GDP gap became positive in 2023 Q4, the subsequent decline in the quarterly potential GDP growth indicates economic stagnation in Korea.
We examine the effectiveness of government financial subsidies on battery electric vehicle (BEV) purchasing behavior using a discrete choice model. By optimizing a representative consumer's decision-making model, we demonstrate that the effectiveness of financial subsidies depend on the price elasticity of BEV demand. By analyzing a dataset of individual consumers' BEV purchase records, we validate our theoretical argument that financial subsidies can encourage consumers to choose eco-friendly BEV models when demand is price elastic. Our findings reveal that South Korean central government subsidies, tailored to the environmental characteristics of EVs, positively influence the sales of eco-friendly BEV models in a price-elastic market. Our results imply that governments should carefully design subsidy policies based on the price elasticity of BEV model demand to maximize their environmental impact.
This review provides an introduction to identification and coefficients, which require identification strategies that are notably different from those for standard fixed-effects models. The strategies imply consistent estimation methods for the parameters of interest, which are also different from those used in standard fixed-effects models. As an introductory review, this work defers detailed implementation procedures for the estimation methods to future studies.
This study examines how socioeconomic differences in health change with improvements in economic and environmental conditions in South Korea. Using a newly collected 0.5% random sample of military records for all males born from 1946 to 1957, I found that socioeconomic disparity in health increased across birth cohorts. A possible hypothesis is that health shocks (such as exposure to war-caused disruptions, natural disasters, and infectious diseases) could weaken the effects of different parental investments. Such shocks were more prevalent prior the end of the Korean War. In support of the hypothesis, I found that socioeconomic disparity in adult height among the cohorts born before 1952 was less pronounced among conscripts from the central region, which was more severely affected by the Korean War, than those from the south region.
In this study, we consider nonparametric estimation and inference for quantile regression (QR) with endogenous regressors. We extend the semiparametric triangular model for QR in Lee (2007) to a nonparametric one, and the identification of the structural parameters is achieved via a control function approach. Based on the identification result, we propose the use of the penalized sieve minimum distance procedure of Chen and Pouzo (2015) and develop an asymptotic theory. The inferential theory is valid regardless of whether or not the functional of the structural parameter is n -estimable, where n denotes the number of observations. We also establish the asymptotic theory for sieve quasi-likelihood ratio test statistics, enabling us to avoid estimating the asymptotic variance. A Monte Carlo simulation study shows that the proposed estimator performs well in finite samples.
This study comprehensively reviews recent developments in the application of the generalized instrument variable (GIV) framework introduced by Chesher and Rosen (2017, Econometrica). The GIV framework effectively derives sharp bounds (equivalent to identified sets) in incomplete models. Focusing on limited dependent variable models with endogeneity, this study demonstrates the application of general identification results to obtain the identified set in specific settings. Moreover, practical implementation challenges that may arise are discussed, and potential strategies for overcoming them are highlighted in empirical research.
We study the effects of the agent's wealth on the agency cost and the principal's profit in the principal-agent model in which the agent's effort entails a monetary cost. We show that if the inverse of the marginal utility function is concave in the utility function, then an increase in the agent's wealth lowers the agency cost for any effort level, directly implying that the principal clearly benefits from such a decrease in the agency cost. However, even if the convexity of the marginal utility function with respect to the utility function is assumed, as in most of the previous results, the effects of the agent's wealth on the agency cost remain unclear in our model. The main reason is because a rise in wealth inevitably makes the incentive problem easier by lowering the marginal cost of effort, reducing the agency cost whereas that convexity raises the agency cost.
The asymptotic behavior of generalized method of moments (GMM) estimators depends critically on whether the underlying moment condition model is correctly specified. Hong and Li (2024) showed that GMM estimators with nonsmooth (nondirectionally differentiable) moment functions are at best n1/3 consistent under misspecification. Through simulations, we verify the decelerated convergence rate of GMM estimators in such cases. For the two-step GMM estimator with an estimated weight matrix, our results align with the theory. However, for the one-step GMM estimator with the identity weight matrix, the convergence rate remains n even under severe misspecification.
This study analyzes how South Korea escaped the Malthusian trap using the Galor-Weil (2000) model. This study contributes to the literature on two points. First, it categorizes the education that enables quantity-quality tradeoffs into secondary and tertiary education. Second, this model was analyzed for the first time in South Korea. According to the empirical findings, education reduces fertility and mortality rates, but tertiary education is necessary for technological progress. South Korean society has changed its structure from quantity to quality and escaped the Malthusian trap as a consequence of its education policies.
