Korea's growth-driven trade policies: Inclusive or exclusive?

Abstract

We attempted to find whether the Korea's growth-driven trade policies during the period of its industrialisation has contributed to output growth together with income distribution by qualitatively analysing the performance of trade policies interacting with the multilateral trading system over time. In addition, we conducted a regression analysis to investigate the effect of Korea's trade growth on inclusive growth during its industrialisation period covering the period of 1976-2011. We found that the recent reform policies reported in the WTO's Trade policy review for Korea in 2016 have attempted to achieve more balanced distribution of gains from trade but not enough to lead the Korean economy to a well-balanced welfare state. More specifically, we found the positive effects of international trade on inclusive growth driven by strong output growth effect, not by the effect on income distribution. Even though income distribution measured by Gini indices has been worsened after the East Asian financial crisis, we could not find significant evidence that Korea's rapid international trade growth has been responsible for the deteriorating income inequality.