Empirical Analysis of Inflation, Immigration and Innovation in the Republic of Korea: Macro and Micro-Economic Perspectives

다국어 초록 (Multilingual Abstract)

This study is focused on macro and micro-economic variables as within an economy micro contribute to macro as a whole. As many variables interact between themselves or single handedly affect economic growth of a country, we try to dissect few but major macro and micro-economic factors such as inflation, immigration and innovation within a particular economy. Inflation (as it drives and derives economic performance) determines the rate of immigration in an economy while also closely and tightly regulates level of innovation. Thus, from both macro and micro-economic perspectives, we aim to look how these three I’ s are being affected or are affecting an economy (case study of Korea).
Inflation is a major impediment of economic growth and since 1990s, Korea has successfully controlled and stabilized inflation rates, thereby transitioning from developing to developed world. As inflation, rates were controlled and economy was stabilized, Korea gradually focused and prioritized on inventing and innovating by creating new ideas and offerings in production activities (improved production index and trade). Improved industrial production and stabilized economy created labor shortage. Hence, increased labor demand opened the door for immigrants in large scale and resulted in migratory waves. These are the rationale for choosing Korean economy for this study.
We analyze the impacts of demand-side determinant (money supply) and supply-side determinant (oil price) on overall and sectoral inflation level in Korean economy. Hence, findings disclosed that there is significant positive relationship between both money supply, oil price and overall inflation as well as sectoral inflation in both the short-run and long- run that was main purpose of our study.
Likewise, we explore the macro-economic determinants of immigration in Korea. Korea, regarded as a country of traditional immigration, now marked by successive migratory patterns due to its incredible economic growth and employment opportunities. We found that in case of Korea, macroeconomic variables such as export, real exchange rate, inflation and final consumption expenditure (FCE) are significant drivers of immigration, in the long- run and IPI in the short-run; evidence for the impact the unemployment rate however, is insignificant. IPI, export, real exchange rate, FCE are the positive drivers of immigration whereas inflation is the negative driver of immigration in the case of Korea.
Lastly, we examine the effect of R&D capacity on firm’s performance for the given period. As per the report, corporate R&D investment has a greater positive effect on the total factor productivity than government invested R&D, therefore we begin the analysis with the question of does R&D capacity ensure greater reward to invest heavily in it at firm level? In our empirical analysis, we found that firms that invest in R&D have a positive and significant impact on their sales. The finding is robust in both fixed & random-effect regression model and robust standard error frameworks.
In addition, we also aim to specify the role of product innovation on firm’s performance. We hypothesized that whether continuous product innovation lead to increase sales in a firm? To examine the relationship between them, we apply instrumental variable (IV) technique that enables us to control for endogeneity issues. We concluded that firms with high intangible intensity tends to be more product innovative which further improve its performance in Korea. The finding is robust in both fixed & random-effect regression model and fixed-effect 2SLS frameworks.

국문 초록 (Abstract)

본 연구는 거시경제적 변수와 미시경제적 변수에 초점을 맞추고 있으며, 경제 내에서는 거시경제적 변수 전반에 미시적 기여를 하고 있다. 많은 변수들이 그들 사이에 상호 작용하거나 한 나라의 경제 성장에 단독으로 영향을 미치기 때문에, 우리는 특정 경제 내에서 인플레이션, 이민, 혁신과 같은 소수의 주요 거시 및 미시 경제 요인을 해부하려고 한다. 인플레이션은 경제에서 이민률을 결정하는 동시에 혁신 수준을 밀접하게 그리고 엄격하게 규제한다. 따라서 거시경제적 측면과 미시경제적 측면 모두에서 이 세 가지 I가 경제에 어떤 영향을 미치고 있는지 또는 어떤 영향을 미치고 있는지 살펴보는 것을 목표로 한다(한국 사례 연구).
물가상승은 경제성장의 주요 장애요인이며 1990년대 이후 한국은 성공적으로 물가상승률을 조절하고 안정시켜 개발도상국에서 선진국으로 전환하고 있다. 물가 상승, 환율 통제, 경제 안정에 따라 한국은 점차 생산 활동(생산 지수와 무역 개선)에서 새로운 아이디어와 오퍼링을 창출함으로써 발명과 혁신에 초점을 맞추고 우선순위를 부여하였다. 산업 생산의 향상과 경제의 안정은 노동력 부족을 초래했다. 이에 노동수요 증가로 대규모 이민의 물꼬가 트였고, 이로 인해 철새의 물결이 일었다. 이 연구를 위해 한국 경제를 선택한 근거는 다음과 같다.
수요측 결정요인(통화공급)과 공급측 결정요인(유가)이 한국경제의 전반적인 및 부문별 인플레이션 수준에 미치는 영향을 분석한다. 따라서 연구 결과는 본 연구의 주요 목적이었던 단기 및 장기 모두에서 통화 공급, 유가 및 전체 인플레이션과 부문 인플레이션 사이에 유의미한 양의 관계가 있음을 밝혔다.
마찬가지로, 우리는 한국의 이민에 대한 거시경제적 결정요인을 탐구한다. 전통적인 이민의 나라로 여겨졌던 한국은 이제 놀라운 경제 성장과 고용 기회 때문에 연속적인 이주 패턴으로 특징지어진다. 한국의 경우 수출, 실질환율, 인플레이션 및 최종소비지출(FCE)과 같은 거시경제적 변수가 장기적으로 이민을, 단기적으로 IPI를 크게 견인하는 요인이지만 실업률에 미치는 영향에 대한 증거는 미미하다는 것을 발견했다. IPI, 수출, 실질환율, FCE는 이민의 긍정적인 동인이며, 한국의 경우 인플레이션이 이민의 부정적인 동인이다.
마지막으로 R&D 역량이 해당 기간 기업 실적에 미치는 영향을 살펴본다. 보고서에 따르면 기업 R&D 투자는 정부가 투자한 R&D보다 총요소생산성에 더 큰 긍정적 영향을 미치는데, 이에 대한 기업 차원의 집중투자에 대한 연구개발 역량이 더 큰 보상을 보장하느냐는 의문에서 분석을 시작한다. 우리의 경험적 분석에서, 우리는 R&D에 투자하는 회사들이 그들의 매출에 긍정적이고 유의미한 영향을 미친다는 것을 발견했다. 이 발견은 고정 및 랜덤 효과 회귀 모델과 강력한 표준 오류 프레임워크 모두에서 강력하다.
또한, 우리는 기업의 성과에 대한 제품 혁신의 역할을 명시하는 것을 목표로 한다. 우리는 지속적인 제품 혁신이 기업의 매출 증대로 이어지는지 여부를 가정했다. 그들 사이의 관계를 조사하기 위해, 우리는 내생성 문제를 제어할 수 있는 도구 변수(IV) 기술을 적용한다. 무형의 강도가 높은 기업은 제품 혁신성이 높아 한국에서의 실적이 더욱 향상되는 경향이 있다고 결론 내렸다. 이 발견은 고정 및 랜덤 효과 회귀 모델과 고정 효과 2SLS 프레임워크 모두에서 강력하다.

목차 (Table of Contents)

• Chapter 1. Introduction 1
• Chapter 2. Role of Money Supply and Oil price on Inflation level in Korea: An ARDL Approach 13
• 2.1. Introduction 15
• 2.2. Literature Review 25
• 2.3. Data & Methodology 28
• 2.3.1. Data Description 28
• 2.3.1.1. Dependent Variables 32
• 2.3.1.2. Explanatory Variables 33
• 2.3.2. Unit-Root Test & Lag-Selection 41
• 2.3.3. Model Specification 42
• 2.4. Empirical Results & Analysis 45
• 2.5. Robustness Check 55
• 2.6. Discussions 57
• 2.7. Concluding Remarks 62
• Chapter 3. Empirical Analysis of Macro-economic Determinants of Immigration in Korea: An ARDL Approach 64
• 3.1. Introduction 66
• 3.2. Literature Review 71
• 3.3. Data and Methodology 72
• 3.3.1. Data Description 72
• 3.3.1.1. Dependent Variable: 73
• 3.3.1.2. Explanatory Variables: 74
• 3.3.3. The ARDL Model Estimation: 82
• 3.4. Empirical Analysis and Results 83
• 3.5. Robustness Check 89
• 3.6. Discussions 90
• 3.7. Concluding Remarks 94
• Chapter 4. Impact of R&D Capacity and Product Innovation on Firm Performance 95
• 4.1. Impact of R&D capacity on Firm Performance in Korea: A Panel Data Investigation 95
• 4.1.1. Introduction 97
• 4.1.2. Literature Review 101
• 4.1.3. Data & Methodology 104
• 4.1.3.1. Data Description 104
• 4.1.3.1.1. Dependent Variable 105
• 4.1.3.1.2. Explanatory Variables 105
• 4.1.3.2. Methodology 112
• 4.1.4. Empirical Estimations & Analysis 113
• 4.1.5. Robustness Check 116
• 4.1.6. Discussions 118
• 4.1.7. Concluding Remarks 120
• 4.2. Impact of Product Innovation on Firm Performance: Empirical Evidence from Korean Firms 121
• 4.2.1. Introduction 123
• 4.2.2. Literature Review 1274.2.3. Data & Methodology 132
• 4.2.3.1. Data Description 132
• 4.2.3.1.1. Dependent Variable 132
• 4.2.3.1.2. Explanatory Variables 133
• 4.2.3.3. Methodology 140
• 4.2.4. Empirical Estimations & Analysis 141
• 4.2.5. Robustness Check 143
• 4.2.6. Discussions 147
• 4.2.7. Concluding Remarks 148
• Chapter 5. Conclusions 150
• Bibliography 151
• 요약 173

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