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Working Paper

Political Economy of Protection Structure in Korea

페이스북
커버이미지
  • 저자 유정호(兪正鎬)
  • 발행일 1991/09/01
  • 시리즈 번호 9116
원문보기
요약 The tariff structure across industries hardly supplies
sufficient information for the protection structure in Korea. They
were much higher than the actual tariffs of the estimated
nominal rates of protection. Also, the variation across the
industries in tariffs is very much different fro, the variation in
NRPs. This difference suggests that NTBs are an important
factor in determining the protection structure, and the importance
of NTBs in turn suggests that the executive branch of the
government has been influential in determining the nominal
protection.

Between 1978 and 1988 the tariffs and actual tariffs
substantially declined, but the average NRP for all industries
rose due to a steep rise in the rate for the agricultural sector.
For other sectors the NRPs declined but more slowly than the
tariffs or actual tariffs. Thus, the buffer between tariffs and
NRPs have diminished. The tendency that the NRPs exceed the
tariffs or actual tariffs. Thus, the buffer between tariffs and
NRPs have diminished. The tendency that the NRPs exceed the
tariffs or actual tariffs for the agricultural sector and machinery
industries changed little during the ten year period covered in
this paper.

In the determination of the nominal protection, the political
consideration represented by either the agriculture dummy or
number of workers was found to have significant influences.
The government's owen agenda for the economy had a strong
influence on the protection structure in the late 1970s and in the
early 1980s, but they appear to have become insignificant later.
In contrast, the influence of the private interest represented by
CR was not apparent in the late 1970s but became stronger in
the later years.

The opposition to protection had an influence on the
protection structure in the passive sense that the consumer
goods tended to be protected more heavily. The forward and
backward linkage opposition standing for an industry's opposition
against the protection of the producers of its inputs were not
found significant. The exporters' opposition against protecting
the producers of its inputs, represented by IE, was found to be
significant in the late 1980s.

The proportion of value added in output was not found to
be significant, but it was once with an unexpected sign. The
physical capital as an industrial characteristics was not found to
have any significant correlation with the nominal protection
structure.

The structure of effective protection seem similar to that of
nominal protection in that the agriculture and machinery
industries were the major beneficiaries and the light industries
producing consumer good s were the victims. Notable exception
to this in the light industries were Tobacco, which was under
the government monopoly, and Clothing.

The estimation of the effective protection determination was
less satisfactory than that of the nominal protection
determination. In the late 1970s, the Heavy and Chemical
Industry Policy was estimated to have had strong influence on
the effective protection structure. The effective protection also
tended to be higher for the industries for which the proportion
of output purchased by the consumers was high. In the early
1980s, the concentration ratio and the number of workers had
significant, positive influence on the effective protection. Besides
these variables, however, most of the others were found to have
little influence, while the coefficients of a few regressors were
estimated to have unexpected signs with high statistical
significance.

The fact that the estimated results of the regression models
were statistically more significant for the structure of nominal
protection than effective protection makes one wonder whether
effective of nominal protection structure better reflects the
political economy of protectionism, expecially in the context of a
developing country. The only reason why one may expect the
structure of effective protection better reflect the forces of the
political economy seems to be that value added should be what
ultimately matters to those who make efforts to obtain the
protection.

However, the effective rates of protection can only be
affected through the nominal rates of protection. Thus, efforts
would first be directed at gaining the nominal protection for
oneself and opposing the nominal protection for the producers of
the inputs that one needs. The effective rates of protection is
the net results of countless such efforts by many. Thus, less
information would be contained in the effective rates than in the
nominal rates of protection about the political economy of
protection.

Moreover, when the government pushes its own agenda for
the economy, what the final outcome of lobbying efforts will be
is less predictable. If the government merely implemented what
is determined by the interest group politics, for example, the
lobbyists and the interest groups will understand sooner or later
what produces the most desired results and will act accordingly.
The government intervention in effect introduces noises in this
feedback process. Hence, it seems that the structure of nominal
protection is a better object to investigate than that of effective
protection for the study of the political economy of protection.

Lastly, an interesting question, as the Korean society is
becoming more democratic, is what will happen to the protection
structure? The significance of the democratization on the subject
of this paper would be that the influences of the politicians and
the industries rise relative to the economic ministries and
technical bureaucrats. In terms of the discussion we had, on the
one hand, it will imply that the influence of such variables as
the agricultural dummy and the number of workers in an
industry will become more pronounced. On the other hand,
interest groups are likely to become more active, raising the
influence on such variable as the concentration ratio on the
determination of protection structure.

To some extent, these changes seem to have already been
taking place, as the regression results indicated. Despite the
changes, however, the pattern of protection across the industries
does not appear to have substantially changed. As mentioned
earlier, besides the agricultural sector, the machinery industries
had consistently enjoyed higher than average NRPs during the
ten year period considered in this study. Since non-tariff barriers
are the important factor in determining the NRPs and the
barriers are administered by the executive branch of the
government, the apparent consistency on the protection structure
seems to indicate that the strength of the government influence
on the protection structure was not substantially affected.

Whether it will remain string in the future is a question
that no one can answers with certainty. Moreover, the pressure
from the international community for market opening has been
and will continue to be strong. Thus, the government has to
compete with the politicians, industrialists, and international
community for the influence on the determination of protection
structure.
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