Practice Homework
Economics 2000
Market Coordination in Korea
1.
Hall and Soskice (2001) identify Germany as a prototypical coordinated market
economy (CME) and the USA as a prototypical liberal market economy (LME). We are
interested in measuring the degree to which market coordination plays a role in Korea.
Use a variety of data sources to ascertain whether the environment in Korea lies closer to
a CME or an LME along a number of dimensions.
A.
Capital Markets
To assess the nature of the financial system, use data from World Economic Forum
Financial Development Report . From class, we offer some relative measures of Capital
Market co-ordination for Germany and USA.
Pillar
Measure
4.01Deposit money bank assets to GDP%1
6.11Stock Market Turnover to GDP%2
5.05M&A transaction value to GDP%3
Germany
130.36
40.07
2.82
USA
64.63
268.78
5.96
Korea
Fill-in the measures from the 2012 report. On which measures is Korea closer to an LME
and on which closer to a CME?
B.
Product Markets
Measure the degree to which the coordination of product markets is co-ordinated.
i.
Get data from the OECD on Product Market Regulation from OECD.StatExtracts.
Under Public Sector, Taxation and Market Regulation Market Regulation Economy-wide regulation
choose
State Control. This measures the degree of
government regulation of goods markets on a scale of 0 to 5 with 5 being
maximum governmental control with Germany falling from above 3 in 1998 to near
2 in 2008 which is still above the USA level near 1.1. What is the level of product
market state control in Korea?
Get data from the World Bank Doing Business database on how hard it is to Start a
Business. What is the ranking of the USA, Germany and Korea on this measure?
Product Market Regulation 4
ii.
Measure
Product Market Regulation: State Control 0-5
Starting a Business Ranking6
5
Germany
1.96
106
USA
1.10
13
Korea
“These are claims on the domestic real nonfinancial sector by deposit money banks as a share of GDP |
2010”
2
“This is the total value of shares traded on stock market exchanges as a percent of GDP | 2010.”
3
“This variable is the rank value of the three-year average of mergers and acquisitions (M&A) transactions
in US dollars as a percent of GDP | 2009-2011”
4
“The OECD Indicators of Product Market Regulation (PMR) are a comprehensive and internationally-comparable set of indicators that measure the
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degree to which policies promote or inhibit competition in areas of the product market where competition is viable. They measure the economy-wide
regulatory and market environments”
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“The OECD Indicators of Product Market Regulation (PMR) are a comprehensive and internationally-comparable set of indicators that measure the
degree to which policies promote or inhibit competition in areas of the product market where competition is viable. They measure the economy-wide
regulatory and market environments”
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“Doing Business measures the procedures, time and cost for a small to medium-size limited liability company to
start up and operate formally. “
How does Korea compare in terms of coordination of the product market?
C.
i.
a.
Labor Markets
Measure the degree of Labor Market Regulation.
Get general rating. Use data from OECD from OECD.StatExtracts. Under
Labour
Employment Protection
Strictness of employment protection – individual and collective dismissals (regular
Report Version 3 for 2011. How is the overall regulation of the Korean
labor market relative to Germany and the US?
b.
Get a specific measure. Use the World Bank Jobs database Link to get data on
Weeks of severance pay for redundancy of experienced workers from 2010 to identify
restrictions on dismissing workers.
ii.
How important is long-term employment in Korea? Use data from OECD from
OECD.StatExtracts. We know that German workers are more likely to have a long job
tenure than American workers. Under Labour Labour Force Statistics Job Tenure Employment by Job
Tenure intervals – persons. Get data on
for Korea in 2011 under the category of 10 years and over and Total. Calculate the
percentage of Korean worker in their current job for more than 10 years.
iii.
The World Economic Forum Executive Opinion Survey Global Competitiveness
Report. provides subjective data on the degree of wage coordination in the economy.
Question 7.02 asks: “In your country, how are wages generally set? [1 = by a centralized
bargaining process; 7 = by each individual company]” The USA ranks 29th in the World
and Germany ranks 141st out of 148 countries. Where does Korea rank?
contracts).
Measure
Strictness of Employment Protection
Weeks of severance pay for redundancy of experienced workers
Employment by Job Tenure intervals – persons8 .%
7.02 Flexibility of wage determination
7
Germany
2.98
USA
1.17
0
28.8%
29th
43.333
43.9%
141st
Korea
D.

Job Training
Measure the degree of vocational training using World Bank EdStats data. Under
Series gets
03 Secondary 2 Total Enrolments Technical/vocational enrolment in upper secondary (ISCED
3) as % of total enrolment in upper secondary (ISCED 3)
Measure
Technical/vocational upper secondary enrolment %
Germany
51.49
USA
0
Korea
In a recent contribution, political economist Michael Witt reports “Interpreted in the
context of the Hall and Soskice (2001) model, Korea falls somewhere between the
opposite poles of coordinated and liberal market economies (CMEs and LMEs).
Developments over the past fifteen years seem to have pushed the system somewhat
closer toward the Anglo-Saxon LME model, though as we have seen actual
practice is far from what one would expect of an LME.” Assess this statement in light of
the evidence you have collected.
“The OECD indicators of employment protection are synthetic indicators of the strictness of regulation on dismissals and the use of temporary
contracts. For each year, indicators refer to regulation in force on the 1st of January. “
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Job tenure is measured by the length of time workers have been in their current or main job or with their current employer.
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