• Korea Trade Review
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• v.46 no.4
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• pp.219-234
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• 2021

Armington elasticity has been a methodology for analyzing how much imports could increase in response to importing price cuts, assuming the possibility of incomplete substitution of domestic and imported products. This study calculates Armington elasticity values in Korean fisheries sector and presents an analysis method for classifying items based on price and preference differences. The model is modified reflecting the characteristics of the fisheries market along with the typical OLS, PAM, and ECM models. The result's implication is that products with a high import growth rate do not necessarily show a high Armington value, but it could be seen that price is not the only factor facilitating fisheries imports increase. Considering the items of which demand increases due to importing price cuts have an indiscriminate demand between domestic and imported products, the results could be interpreted that the Korean fisheries importing market has been easily affected by the changes in import prices. Fisheries grouping by price and preference demonstrates that explanatory variables other than price should be considered when estimating import demand.

• Korean Journal of Agricultural Science
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• v.48 no.4
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• pp.911-926
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• 2021

We devised a grape variety model to estimate the impact of lowering the Shine Muscat quality level on the grape market. Shine Muscat has become a popular grape variety in Korea. Accordingly, the area devoted to the harvesting of Shine Muscat has increased dramatically since 2016. Our study examines how a reduction in the quality of Shine Muscat affects other grapes such as Campbell Early, giant peak, and Muscat Bailey A (MBA). The Armington model was used to impose consumer preferences and product differentiation assumptions. We found that a decrease in the consumer preference for Shine Muscat realized by lowering the quality of Shine Muscat largely reduces the price of this variety. Also, the prices of other grape varieties fell via a substitute effect. Moreover, if grape varieties were more differentiated, the reduction in the price of Shine Muscat would be greater, while the decreases in the prices of other grape varieties would be smaller. These results imply that farmers of Shine Muscat must continue with quality management efforts to avoid the negative effect of changing consumer behavior with regard to Shine Muscat against a reduction in its quality. Our model introduces a product differentiation model for the fruit market and helps policymakers and farmers understand the impact of changing market conditions in the fruit market.

• Journal of Korea Trade
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• v.25 no.3
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• pp.48-64
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• 2021

Purpose - This study examined the effect of tariff cuts on productivity in Korea's manufacturing industries and the effect of initial productivity level before tariff cuts on productivity improvement after tariff cuts. We also attempted to identify whether import-driven or export-driven factors are more important for productivity improvement, especially in low productivity industries. Design/methodology - Since tariff reduction is a policy decision that can affect cross-industry, its impact is spread across all industries beyond the scope of a single firm through the input and output network of industry structure. Accordingly, we proposed a new method to measure the change in productivity to reflect the impact of tariff cuts across industries. Through an Armington CGE analysis, changes in endogenous variables can be directly measured after the exogenous shock of tariff reduction, and the amount of movements in productivity triggered by tariff cuts can also be calculated. We can thus assess the effectiveness of exogenous policy, such as tariff cuts, through the difference between the benchmark and counterfactual values of endogenous variables. Findings - This study confirmed that tariff reduction positively affected productivity improvement in Korea's manufacturing industries. It also confirmed that productivity gains occur in Korea's leading export industries. Finally, greater productivity gains were recorded in the group with additional high-export-share or high-import-share conditions for low productivity industries. These results are, in a limited sense, consistent with the existing studies that emphasize the importance of exports and imports on productivity improvement, especially for low productivity industries. Originality/value - The results of our experiments are different from those of non-CGE studies, which measure the industry-level change in productivity with dummy coefficients, in terms of directly calculating the amount of change in productivity. In addition, we propose that the Armington CGE model is more appropriate than the Melitz CGE model to directly measure the productivity after tariff cuts. This is because the Melitz CGE model assumes the given specific productivity density, which does not change after an overall drop of tariffs. To the best of our knowledge, this approach to directly calculating productivity by reflecting the impact of tariff reduction across industries through CGE analysis, is unprecedented in this literature.

• Korea Trade Review
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• v.45 no.1
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• pp.137-153
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• 2020

On February 14, 2019, the government of Korea formally decided to consider the feasibility of joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and has since been conducting bilateral consultations with individual member countries. In terms of the impact estimation, the CPTPP is actually a Korea-Japan FTA, and the most sensitive issue in the FTA is the opening of the auto industry market to Japan. Despite these circumstances, previous studies have predicted that the auto industry will be a beneficiary industry when joining the CPTPP. However, the Korean auto industry is opposed to joining the CPTPP. In order to investigate the cause of this discrepancy, this paper examines the problems of previous studies in estimating the impact of joining the CPTPP and found that the preceding study did not consider the industrial characteristics of the auto sector, especially in the context of Japan-Korea trade, and was heavily dependent on the Armington elasticity (structure) in the demand function of the GTAP CGE model. As a result, the domestic auto sector could lower prices and increase exports when joining the CPTPP. This paper attempts to precisely re-estimate the impact of joining the CPTPP on the auto sector in a way that corrects these problems by changing the CGE model and reflecting the major characteristics of the industry, with policy implications for the negotiation of CPTPP accession.

• Environmental and Resource Economics Review
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• v.20 no.3
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• pp.419-457
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• 2011

This study aims at understanding the characteristics of global economic models, which are widely used for climate change policy analysis. A literature review study was conducted in order to derive general features of top-down models such as CGE and bottom-up/hybrid models such as GTEM. Furthermore, a structural analysis was carried out by applying parameter and structural components from other models to a particular model to observe the potential differences in outcomes. Literature review shows that bottom-up or hybrid models generally have higher level of reduction potentials than top-down models in the long run. This contradicts the conclusion presented by IPCC, and raises the need for more rigorous investigation through structural analysis. Structural analysis of EPPA model indicates that the structural component of the energy sector in a particular model is the most influential factor in predicting baseline emissions and reduction potentials. This includes the structure among energy, capital, and labor inputs, and the substitution elasticities within the energy bundle. Technology bundle can establish the conclusions from literature review, and change in Armington elasticities do not significantly affect the outcome in aggregate.