Author: Sunghoon Chung

Publisher:

Published: 2016

Total Pages: 101

ISBN-13:

English Abstract: The concept of Global Value Chain (GVC) is garnering renewed attention as the production processes become more internationally fragmented with the development of technology and the reduction of trade costs. Korea has also actively participated in GVCs ever since it adopted export-driven growth strategy way back in 1960s and fully liberalized its import market in 1980s. Such active international production sharing led to low domestic value added embedded in Korea's export. However many still see export itself as the primary objective for Korea. With this in mind, this study attempts to reinterpret Korea's trade and industrial structure from the perspective of GVCs with the aim to better understand Korean economy and suggest policy direction that can lead to further economic development.The study first defines the concept of GVC, and then shows how deeply Korea is involved in the GVCs using the World Input Output Table (1995~2011) and the relevant Socio-Economic Accounts. Then it shows how much Korea has exported in value added terms and compares it with the traditional gross exports. Lastly, the relationship between the evolution of GVCs and the income and employment structure of domestic industries is analyzed.The findings and policy implications can be summarized as follows: Korea has conducted internationalization of production activities at a significantly higher speed than other countries. Meanwhile, the increase in foreign final demand has boosted export of domestic value added which led to growth in GDP. This was achieved by exporting intermediates rather than final goods. It was also identified that the internationalization of production activities increased the demand for domestic high-skilled labor and replaced domestic middle- and low-skilled labor with those from abroad. Based on these findings this study suggests to (i) strengthen the competitiveness of domestic inputs, (ii) systematically analyze foreign final demands and actively break into foreign markets, and (iii) develop the capacity of domestic workers.