the outbreak of the 1997 financial crisis and its recovery doowon lee professor of economics yonsei...

The Outbreak of the 1997 FinanciThe Outbreak of the 1997 Financial Crisis and Its Recoveryal Crisis and Its Recovery

Doowon LeeDoowon LeeProfessor of EconomicsProfessor of Economics

Yonsei University, Seoul, KoreaYonsei University, Seoul, KoreaDoowon Lee, School of Economics, Yonsei UniversityDoowon Lee, School of Economics, Yonsei University

Doowon Lee, School of Economics, Yonsei UniversityDoowon Lee, School of Economics, Yonsei University

I. Outbreak: Causes of CrisisI. Outbreak: Causes of Crisis

IMF Bail Out &

Sharp Depreciation of e

Absence of International Crisis

Management System

Korean Gov.'s Effort to Defend Exchange Rate

Failed

Failure to Roll over Short-Term Foreign Debts(kind of Bank run)

Losing International

Credibility

Financial Sector

Corporate Sector

External Sector

*Mounting Bad Loans

*Losing Competitiveness*Excessive Investment (I>S)*Poor Corporate Governance System

*Current Account Deficits Financed by Foreign Borrowing (carry trade?)*Unprepared Financial Market Liberalization


I. Outbreak: International Comparison of Debt-Equity Ratios of I. Outbreak: International Comparison of Debt-Equity Ratios of Mfg IndustryMfg Industry

South South KoreaKorea

(1997)(1997)


(2004)(2004)

GermanyGermany

(1966)(1966)

JapanJapan

(1999)(1999)

Taiwan Taiwan province of province of

ChinaChina

(1995)(1995)

U.S.U.S.

(1999)(1999)

3.963.96 1.041.04 0.980.98 1.741.74 0.860.86 1.641.64

* Sources : Krueger and Yoo (2001).* Sources : Krueger and Yoo (2001).

Bank of Korea, Bank of Korea, Bank of Korea InformationBank of Korea Information (June, 2001, p.6 (June, 2001, p.6

6)6)


Financing Cost of Manufacture Co.

0

1

2

3

4

5

6

7

8

9

10

1996 1997 1998 1999 2000 2001

(%)

Ratio of Financial Cost to Sales

* source: The Bank of Korea website (www.bok.or.kr)

I. Outbreak: Debt Service Burden of Manufacture CompanyI. Outbreak: Debt Service Burden of Manufacture Company

http://www.bok.or.kr/

Sources : Korea Financial Supervisory Service (Sources : Korea Financial Supervisory Service (www.fss.or.kr) ; ) ; The BankerThe Banker (July 2000, July 2001), recited From (July 2000, July 2001), recited From www.seri.org (200 (2001.6) and www.bok.or.kr1.6) and www.bok.or.kr

Note : Note : * Average of all the commercial banks’ NPL.* Average of all the commercial banks’ NPL.

Korea has changed its criteria of NPL in 1999 accordingKorea has changed its criteria of NPL in 1999 according

to international standard. to international standard. The ratio of NPL to total loansThe ratio of NPL to total loans

increased after the adoption.increased after the adoption. Thus ‘13.6’ is value derivedThus ‘13.6’ is value derived

from new criteria and ‘8.3’ is based on previous criteria.from new criteria and ‘8.3’ is based on previous criteria.

** Average of ten biggest commercial banks’ NPL.** Average of ten biggest commercial banks’ NPL.

*** Average of five biggest commercial banks’ NPL.*** Average of five biggest commercial banks’ NPL.



(1997)(1997)


(1999)(1999)


(June, ’01)(June, ’01)

U.S.**U.S.**

(2000)(2000)

Japan**Japan**

(2000)(2000)

Germany*Germany*****

(1999)(1999)

U.K.***U.K.***

(1999)(1999)

6.06.08.3 8.3 → →

13.6*13.6*5.75.7 1.211.21 5.445.44 1.31.3 2.172.17

I. Outbreak: International Comparison of NPL (unit: %)I. Outbreak: International Comparison of NPL (unit: %)

http://www.fss.or.kr/

http://www.seri.org/

Corporate and financial sector restructuredCorporate and financial sector restructured

Three party agreement between labor, manager, Three party agreement between labor, manager,

and governmentand government

Export led recovery -> current account surplusExport led recovery -> current account surplus

Exchange rate stabilizedExchange rate stabilized


II. Crisis Recovery II. Crisis Recovery


II. Recovery: General ReviewII. Recovery: General Review

Support by

Government

Budget

Financial Sector

Restructuring

• M&A or Liquidation

(Applying BIS criteria)

• Liberalization

• Removing Bad Loans

Attracting Foreign Capital

• FDI

• Portfolio Investment

Establishment of Social Safety Net

• Calm Labor Dispute

• Create Jobs

• Help the Unemployed

• Increase Foreign Exchange Reserve

• Decrease Foreign Debt

Domestic

Economy

Current Account Surplus

External

Economy

Recovery

of Korean

Economy

Corporate Sector

Restructuring

• Lower Debt/Equity Ratio

• Improving Corporate

Governance

• M&A

II. Recovery: Summary of Reforms in Four Major AreasII. Recovery: Summary of Reforms in Four Major Areas


• Note : * BIS(bank of International Settlements) ratio measures the ratio of bank’s equity over a weighted average of

risky assets. The higher this ratio is, the more financially sound is the bank.

• sources : Bank of Korea website (www.bok.or.kr); Korea Financial Supervisory Commision website (www.fss.or.kr);

Korea National Statistical Office website (www.nso.go.kr); Korea Development Institute website

(www.kdi.re.kr); Fair Trade Commission website (www.ftc.go.kr)

1) Financial Sector

Pre-Crisis Situation Reform Measures Changes and Achievements

① 14 of the 27 commercial

banks below BIS ratio of

8%*

② Troubled loans are

estimated to be W 118

trillion as of March 1998

③ Lack of proper supervision

① FSC and FSS established.

② Initially W64 trillion of

public fund was thought to

be needed. As of the end

of 2005, total of W168

trillion was injected and

W76 trillion retrieved.

① Number of financial

institution dropped from

2,102 to 1,341 between

1997 and 2007.

② Impaired loans

(substandard or below) as

of June 2001 estimated to

be W 65 trillion, estimated

to be W 49.8 trillion.



http://www.nso.go.kr/

http://www.kdi.re.kr/

http://www.ftc.go.kr/

II. Recovery: The Number of Financial InstitutionsII. Recovery: The Number of Financial Institutions


Fianacial Sector End of 1997 March, 2007 Change

Commercial Banks 26 13 -13

Specialized and Development Banks 7 5 -2

Merchant Banks 30 2 -28

Securities Firms* 36 54 +18

Insurance Companies 50 51 +1

Investment Companies 31 51 +20

Leasing Companies 25 35 +10

Mutual Savings & Finance Companies 231 110 -121

Credit Unions (Credit Cooperatives) 1,666 1,020 -646

Total 2,102 1,341 -761

• Note : * The number of security firms increased due to the establishment of foreigners-owned security firms.

Also, some merchant banks are transformed into security firms.

• Sources : Recited from Figure 5 of Jones (2002), Financial Supervisory Service of Korea

BIS ratio of Commercial Banks in KoreaBIS ratio of Commercial Banks in Korea


* Sources : Bank Management Statistics of Financial Supervisory Service of Korea

BIS ratio

8

9

10

11

12

13

14

1997 1998 1999 2000 2001 2002 2003 2000 2005 Year

BIS(%)

Domestic Foreign Compounded

ROE ratio of Commercial Banks in KoreaROE ratio of Commercial Banks in Korea



ROE ratio

-60

-50

-40

-30

-20

-10

0

10

20

30

1997 1998 1999 2000 2001 2002 2003 2004 2005 Year

ROE(%)


ROA ratio of Commercial Banks in KoreaROA ratio of Commercial Banks in Korea


ROA ratio

-4

-3

-2

-1

0

1

2

1997 1998 1999 2000 2001 2002 2003 2004 2005 Year

ROA(%)





2) Corporate Sector


① Highly leveraged firms with

debt/equity ratio of 396.3%

for manufacturing firms in

the end of 1997

② Poor corporate

governance : cross-debt

guarantees, cross-

shareholdings

③ Lack of transparency and

tricky accounting practice

① Five guidelines

② Big Deals

① Debt/equity ratio dropped :

100.9% for manufacturing

firms by 2005.

② Cross-debt guarantee

decreased from W 11

trillion of 1998 to W 0.2

trillion of 2001 for the

largest 5 conglomerates










II. Recovery: International Comparison of Debt-Equity Ratios of II. Recovery: International Comparison of Debt-Equity Ratios of Mfg IndustryMfg Industry


(1997)(1997)


(2005)(2005)

GermanyGermany

(1996)(1996)

JapanJapan

(1999 -> 2003)(1999 -> 2003)

Taiwan Taiwan provincprovinc

e of e of ChinaChina

(1995)(1995)

U.S.U.S.

(1999 -> 2004)(1999 -> 2004)

3.963.96 1.011.01 0.980.98 1.74 -> 1.451.74 -> 1.45 0.860.86 1.64 -> 1.411.64 -> 1.41* Sources : Krueger and Yoo (2001).* Sources : Krueger and Yoo (2001).

Bank of Korea, Bank of Korea, Bank of Korea InformationBank of Korea Information (June 2001, Sep 2005) (June 2001, Sep 2005)

Bank of Korea, Bank of Korea, Principal Economic IndicatorsPrincipal Economic Indicators (May 2007) (May 2007)

Average of 1990~1997

1998 2000 2002 2004

Corporate Finance

115.9 59.6 128.7 167.2 176.6

Internal Source

33.9

(29.3)

31.6

(53.0)

62.9

(48.9)

83.9

(50.2)

110.8

(62.7)

External Source

82.0

(70.7)

28.0

(47.0)

65.8

(51.1)

83.3

(49.8)

65.8

(37.3)

The Volume and Composition of Corporate FinanceThe Volume and Composition of Corporate Finance

* Note : Numbers in parentheses are % ratios.

* Source : A periodical, “ 경제포커스 (in Korean)” No.112, Samsung Economic Research Institute

(Unit : bn Kr\, %)


Proportion of Direct Finance Out of External SourcesProportion of Direct Finance Out of External Sources


•Source : Hahm, Joon-Ho(2007), “ 금융시스템의 변화와 평가” presented at 『 A Decade after Financial Crisis : Process and Problem 』 , 2007 Seminar of Korean Economic Association (June 11th, 2007)



3) Labor Market


① Rigid and militant labor

union

② Average nominal wage

increase rate (13.45%)

higher than average labor

productivity growth

rate(10.37%) from ’92~’96

③ Absence of social safety

net

① Tripartite Commission

established.

② Social safety net hastily

set up (employment

insurance system, public

works program, national

basic livelihood security

act).

① More flexible labor market

② Average labor productivity

growth rate (18.73%)

higher than average

nominal wage increase

rate (5.87%) from ’98~’00.

③ Productive welfare system









Painful Process of Laying-OffPainful Process of Laying-Off


* Sources : Recited figure 3 of An article on East Asian Economies “Gold from the Storm”, Economist, June 28th 2007

II. Recovery: Unemployment RateII. Recovery: Unemployment Rate

2.6

76.6

4.44

3.33.6 3.7 3.7 3.5 3.3

0

1

2

3

4

5

6

7

8

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

%


* source : Bank of Korea (http://www.bok.or.kr)



4) Government Sector


① Regulation

② Inefficient public

enterprises

① Administrative reform

② Deregulation

③ Privatization

① Total number of civil

servants decreased from

919,404 to 885,164

between Feb 1998 and

Feb 2003.

② Number of regulations

decreased from 10,717 of

August 1998 to 7,156 of

July 2001.

③ Privatized 6 public

enterprises and plan to

privatize 5 more as of Jan.

2001.• sources : Bank of Korea website (www.bok.or.kr); Korea Financial Supervisory Commision website (www.fss.or.kr);








The Number of Public Officials by Successive AdministrationsThe Number of Public Officials by Successive Administrations


* Sources : Maeil Business Newspaper, July 11th 2007.

(unit : persons)

The Total Number of Public Officials

5th

Administration6th “Civilian” “A People” “Participation”

II. Recovery: Growth Rates of Macroeconomic IndicesII. Recovery: Growth Rates of Macroeconomic Indices


• Note : * The growth rates are compared to the same quarter of the previous year.

** Figures for 2000 and 2001 are annual figures.

• sources : Major Indicators of Korean Economy, Korea Development Institute, 2002. 3. 9., p.41

Bank of Korea website (www.bok.or.kr)

1998 19992000 2001

1/4 2/4 3/4 4/4 1/4 2/4 3/4 4/4

Growth Rate(%) *

GDP -6.7 10.9 12.6 9.7 9.2 4.6 3.7 2.7 1.8 3.7

Consumption -11.7 11.0 10.8 8.9 5.7 3.2 1.5 4.1 4.8 6.6

Investment(equipment) -38.8 36.3 62.6 41.6 31.9 8.1 -8.4 -11.2 -15.7 -3.1

Investment(construction) -10.1 -10.3 -6.8 -4.2 -3.5 -2.5 1.5 1.1 8.2 10.7

Consolidated budget

/ GDP(%)**-4.2 -2.7 1.3 1.0

Current account balance

(bn $)40.4 24.5 1.6 2.9 4.2 3.5 2.8 3.8 1.0 1.1

Inflation rate 7.5 0.8 2.0 1.6 3.0 2.5 3.6 5.0 4.2 3.4

Unemployment rate 6.8 6.3 5.1 3.8 3.6 3.7 4.8 3.5 3.3 3.2



II. Recovery: Exports Have Been the Main Driver for II. Recovery: Exports Have Been the Main Driver for GrowthGrowth

10

15

20

25

30

35

40

45

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

10

15

20

25

30

35

40

45Merchandise Exports

(Percent change, y/y, two-month average)

II. Recovery: Exchange Rate Fluctuation (monthly)

II. Recovery: Exchange Rate Movement (annual)II. Recovery: Exchange Rate Movement (annual)

771 805

951

1,399

1,1891,131

1,291 1,2511,192

1,145

1,024956

0

200

400

600

800

1,000

1,200

1,400

1,600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

(won)



0

200

400

600

800

1000

1200

1998-01-03 1999-01-03 2000-01-03 2001-01-03 2002-01-03

KOSPI

II. Recovery: Movement of KOSPI after the Crisis

Withdrawal of foreign capital, but in what Withdrawal of foreign capital, but in what

channel?channel?

- Little FDI before 1997 - Little FDI before 1997

- Stock market partially opened- Stock market partially opened

- Borrowing from foreign banks- Borrowing from foreign banks

- Especially the loan from the Japanese - Especially the loan from the Japanese

banksbanks


III-1. Role of Foreign Capital in the Outbreak of CrisisIII-1. Role of Foreign Capital in the Outbreak of Crisis

Inflow & Outflow of Portfolio InvestmentInflow & Outflow of Portfolio Investment


* Source : Economic Statistic System, Bank of Korea

Inflow & Outflow of Portfolio Investment

- 5

- 4

- 3

- 2

- 1

0

1

2

3

4

5

1997 1Q 2Q 3Q 4Q 1998 1Q 2Q 3Q 4Q

(Year, Quarter)

(bn, US$)

Outflow of Portfolio Investment Inflow of Portfolio Investment

Composition of Foreign LiabilitiesComposition of Foreign Liabilities



(mn, US$)

Total Foreign LiabilitiesGovernmentMonetary AuthorityCommercial BanksExcetra (NBFI)

Were there no crisis if capital market was not liberalized?Were there no crisis if capital market was not liberalized?

Even before capital market liberalization, there existed inEven before capital market liberalization, there existed in

satiable demand for capital by satiable demand for capital by conglomerates.conglomerates.

Excessive investment caused chronic trade deficit and incrExcessive investment caused chronic trade deficit and incr

easing NPLseasing NPLs

Foreign exchange crisis could have been avoided if e was aForeign exchange crisis could have been avoided if e was a

llowed to depreciate, which was politically difficultllowed to depreciate, which was politically difficult

Even if capital market was not liberalized, mounting NPLEven if capital market was not liberalized, mounting NPL

s would have caused domestic financial crisis.s would have caused domestic financial crisis.


III-1. Role of Foreign Capital in the Outbreak of CrisisIII-1. Role of Foreign Capital in the Outbreak of Crisis

Initially, it provided much-needed liquidities.Initially, it provided much-needed liquidities.

It boosted stock market, and partially eliminated It boosted stock market, and partially eliminated

the so-called ‘Korea Discount’ the so-called ‘Korea Discount’

Structural reforms and improved profitabilityStructural reforms and improved profitability

Protection of minority shareholders’ rightProtection of minority shareholders’ right

Improved transparency (case of SK)Improved transparency (case of SK)


III-2. Role of Foreign Capital in the Recovery: Positive III-2. Role of Foreign Capital in the Recovery: Positive AspectAspect

Inflow of Foreign CapitalInflow of Foreign Capital



Inflow of Foreign Capital

- 50- 25

0255075

100125150175200225250275300325350

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

(Year)

(bn, US$)

FDI Portfolio Investment Foreign Debt

Price Earning Ratio, August 10 2005

0

5

10

15

20

25

30

J apan U.S. HongKong

Singapore Taiwan Thailand Korea

PER

Price Earning Ratio, Apr 18 2006

0

5

10

15

20

25

30

35

40

J apan U.S Singapore Taiwan Hong Kong Korea Thailand

PER


Price Earning Ratio (PER)

MSCI World Average PER MSCI World Average PER (left scale)(left scale)

MSCI Korea PER MSCI Korea PER (left scale)(left scale)

( times)( times)

yearyear

Korea PER / World PER Korea PER / World PER (right scale)(right scale)

* source : Maeil Business Newspaper (June the 4th, 2007)

Proportion of Foreign Possession in Stock MarketProportion of Foreign Possession in Stock Market


* Sources : A Periodical “Securities & Futures, the May 2007 issue, Korea Exchange

(%)

Institutes Corporate

Individuals Foreigners

Consumer loans increased, and HH debt (fueled Consumer loans increased, and HH debt (fueled

by the government policy of easy credit) by the government policy of easy credit)

accumulated that dampened consumptionaccumulated that dampened consumption


III-3. Role of Foreign Capital in the Recovery: III-3. Role of Foreign Capital in the Recovery: Negative Aspect 1Negative Aspect 1

Proportion of Corporate Loan and Household Loan Out of Proportion of Corporate Loan and Household Loan Out of Commercial Bank CreditCommercial Bank Credit


Corporate Loan Household Loan

•Source : Hahm, Joon-Ho(2007), “ 금융시스템의 변화와 평가” presented at 『 A Decade after Financial Crisis : Process and Problem 』 , 2007 Seminar of Korean Economic Association (June 11th, 2007)

Household Debt & Credit (percentage of GDP)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Household debt Household credit



HH Debt Suppress ConsumptionHH Debt Suppress Consumption

-4

-2

0

2

4

6

8

10

12

14

1999 2000 2001 2002 2003 2004 2005 2006 1/4

Consumer Expenditure GDP

* source : ecos.bok.or.kr* source : ecos.bok.or.kr

Growth potential deterioratedGrowth potential deteriorated Less investment as banks are reluctant to lendLess investment as banks are reluctant to lend

Threat of hostile take-over has prevented big companieThreat of hostile take-over has prevented big companie

s from making large-scale and long-term investment: cs from making large-scale and long-term investment: c

ash-hoarding, increased divident payment, buying its oash-hoarding, increased divident payment, buying its o

wn shares. But, it is difficult to generalize.wn shares. But, it is difficult to generalize.

Increased regulation, rapidly aging population, and insIncreased regulation, rapidly aging population, and ins

table labor relation are also responsible for deterioratitable labor relation are also responsible for deteriorati

on of growth potentialon of growth potential



- 8

- 6

- 4

- 2

0

2

4

6

8

10

12

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Years

GD

P G

row

th R

ates

경제성장률 잠재성장률

Falling Growth Rate

Falling Growth Rate

Five Asian Economies’ Investment ratio & Growth rateFive Asian Economies’ Investment ratio & Growth rate


* Sources : Recited figure 1 of An article on East Asian Economies “Gold from the Storm”, Economist, June 28th 2007

PEF: Short-term speculative gains that were non-taxable: PEF: Short-term speculative gains that were non-taxable:

Case of Case of Lone Star’sLone Star’s take over of take over of Foreign Exchange BankForeign Exchange Bank o o

f Korea in 2003f Korea in 2003

As part of the banking sector is under foreign ownership, As part of the banking sector is under foreign ownership,

public goodpublic good nature of banking industry is under threat. Al nature of banking industry is under threat. Al

so, it is difficult to carry out the old-style industrial policy so, it is difficult to carry out the old-style industrial policy

(case of (case of The First BankThe First Bank w.r.t. Hynix), which is not always w.r.t. Hynix), which is not always

a bad thing.a bad thing.

Some myths about foreign capital: herd behavior? IncreasSome myths about foreign capital: herd behavior? Increas

ed volatility? Increased divident/profit?ed volatility? Increased divident/profit?



Invasion of Private Equity FundInvasion of Private Equity Fund


* source : Maeil Business Newspaper (June the 23rd, 2007)

Fixed e with capital market liberalization is difficult to Fixed e with capital market liberalization is difficult to

maintainmaintain

After all, it was sound fundamentals of the Korean After all, it was sound fundamentals of the Korean

economy that enabled the recovery economy that enabled the recovery

Foreign capital is a two-edged sword. Also, it is difficult Foreign capital is a two-edged sword. Also, it is difficult

to define ‘foreign capital’ in one word as they are not to define ‘foreign capital’ in one word as they are not

homogeneous.homogeneous.

Sequential liberalization of capital market is necessarySequential liberalization of capital market is necessary

Too much foreign exchange reserve can also be a problemToo much foreign exchange reserve can also be a problem


IV. Lessons of the Korean CrisisIV. Lessons of the Korean Crisis

Low investment growth rateLow investment growth rate

Credit bubble and household debt -> weak consumption Credit bubble and household debt -> weak consumption

growth growth

Government owned financial institutionsGovernment owned financial institutions

Ballooning government debt: public fund and budget Ballooning government debt: public fund and budget

deficitdeficit

Worsened income distribution and poverty problemWorsened income distribution and poverty problem

Bi-polarization of the economyBi-polarization of the economy

Set back of reforms in labor market and governmentSet back of reforms in labor market and government


V. Side Effects and Remaining AgendaV. Side Effects and Remaining Agenda

Resulting in Unbalanced GrowthResulting in Unbalanced Growth


40

60

80

100

120

140

160

180

200

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1/440

60

80

100

120

140

160

180

200

Industrial Production Index Export * source : kosis.nso.go.kr* source : kosis.nso.go.kr

Private consumption & Export % changePrivate consumption & Export % change

-20

-15

-10

-5

0

5

10

15

20

25

30

35

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

% c

hang

e

private consumption export



Recipient of Basic Livelihood GuaranteeRecipient of Basic Livelihood Guarantee


1,420

1,351

1,374

1,424

1,513

1,250

1,300

1,350

1,400

1,450

1,500

1,550

2001 2002 2003 2004 2005

(thousand)

Gini's coefficientGini's coefficient

0.283

0.3160.320

0.317 0.319

0.312

0.3060.310 0.310

0.26

0.27

0.28

0.29

0.30

0.31

0.32

0.33

1997 1998 1999 2000 2001 2002 2003 2004 2005



Recent movement of Korean labor market:Recent movement of Korean labor market:

• Anglo Saxon to Europe

0

1

2

3

4

5

6

7

8

0 2 4 6

Labour Regulation Index

Unem

plo

ym

ent

(%)

1996

2003

1997

1998

1999

2000

2001

2002

2004


Conflicts between Labor and CapitalConflicts between Labor and Capital


0

50

100

150

200

250

300

350

400

450

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

the

num

ber o

f par

ticip

ants

(thou

sand

)

0

200

400

600

800

1000

1200

1400

1600

1800

the

num

ber o

f cas

es

participans(left scale) cases(right scale)

* source: Korea Labor Institute (https://www.kli.re.kr)

7.9

7.4 7.3

6.9 6.8 6.8

6.36.1

5.7

5.1

4.7

3.5

0

1

2

3

4

5

6

7

8

9

Singapore Hong Kong Canada USA J apan UK France Germany Italy Korea India China

country

%

Deregulation Index (2004)

Year 1998 2000 2002 2004 2007

Regulations 10190 7156 7723 7846 8083

Number of Regulations

Korea of 2004 and the reference years of advanced countriesKorea of 2004 and the reference years of advanced countries

Countries Finland France German Ireland Italy Japan

Years 1997 1986 1990 1995 1987 1987

Countries Netherlands Norway Spain Sweden U.K. U.S.A.

Years 1989 1978 1999 1987 1989 1974

Reference Years for Advanced Economies


Government role and size: Government role and size: G/Y, social security/G, index of agingG/Y, social security/G, index of aging

Country Reference YearGovernment Size (%,

G/Y)

Social Security and

Welfare out of GDP (%)Index of Aging unemployment rate

Japan1) 1987 16.48 9.79 11.5 2.8

USA 1974 19.4 8.1 10.11 5.59

Spain 1999 20.64 11.34 16.4 15.88

Korea 2004 25.18 6-7 (2005) 7.28 3.49

Germany 1990 29.46 13.78 15 6.21

Ireland 1995 30.63 10.31 11.4 14.1

UK 1989 33.93 10.6 15.5 5.99

Finland 1997 34.54 13.52 14.5 16.35

Norway 1978 35.35 17.26 14.8 1.65

Italy 1987 38.63 17.84 14.1 11.9

Sweden 1987 39.63 18.4 17.7 2.1

France 1986 43.4 19.41 13.5 10.4

Netherlands 1989 54.08 18.61 13 5.8


Decomposition of Sectoral Output per Worker Growth, Average of 1970-2001

1.5

2.9

5.8

2.61.7 1.9

0.3

1.9

0.5

0.3

-0.1 -0.1

0.6 0.1

-0.2

0.5

2.7

3.9

5.3

-0.4

0.6

3.6

-1.6

3.0

-2

0

2

4

6

8

10

12

All industry Manuf. Elec.,gas,water Construct. Wh.,retailtrade

Transport Finance Other serv.

Capital-labor Human capital Productivity

the outbreak of the 1997 financial crisis and its recovery doowon lee professor of economics yonsei...

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