00:00 Good afternoon,
00:01 everyone.
00:01 Uh,
00:01 it's very,
00:02 uh,
00:02 uh,
00:03 good to kind of see you join the weekly seminar for the 2024 WDR
00:09 that focuses on economic growth in middle-income countries.
00:13 Uh,
00:13 I'm Sho McLal and with our
00:16 lead academic Ufuk Akcheed
00:18 and our TTL,
00:20 uh,
00:20 Joyce Abraham.
00:21 We are very
00:22 happy to welcome you to this seminar this afternoon
00:26 that has,
00:27 um,
00:28 Two of our background paper contributors,
00:31 Yong Hon Shim and uh Sina Attis,
00:35 who are going to tell us a little bit about an overview on the role of trade
00:41 and firms in economic development and they do a very nice
00:45 synthetic piece on that.
00:47 In addition,
00:48 Yung-hun and uh Sina will go deeper
00:52 into the South Korean experience.
00:55 And colleagues,
00:56 uh,
00:56 this is
00:57 the
00:57 first week of the next 3 weeks,
01:00 we'll be focusing on different
01:02 economic stories from South Korea,
01:04 so keep tuned on that.
01:06 So as,
01:07 uh,
01:07 words of introduction,
01:09 uh,
01:09 seen as a principal economist at the Board of Governors for the Federal Reserve.
01:14 And uh he does work,
01:16 a lot of work on looking at firm dynamics and looking at innovation,
01:21 competition
01:22 with uh a strong focus on quantitative analysis.
01:26 Jung-hen Shim uh is,
01:29 has just joined the IMF
01:31 uh research department,
01:33 but we'll still collaborate with him.
01:35 It's OK.
01:36 Uh,
01:36 so,
01:37 uh,
01:37 Jung-hen's been doing a lot of work
01:39 on macroeconomic growth and international trade.
01:43 And his research really looks at the role of technology adoption.
01:49 And innovation
01:50 over different stages of development.
01:52 And that's why Junghan your research is so central
01:56 to some of the ideas we are developing and putting forward in this year's WDR.
02:02 Uh,
02:03 Yong-han just completed his
02:04 PhD from the University of Chicago and Yuk was his
02:09 principal advisor.
02:10 So colleagues,
02:11 what I'll do is,
02:12 uh,
02:12 give you the floor.
02:13 You have about 40 minutes.
02:16 To
02:17 present
02:17 the key ideas from these uh background papers,
02:21 and then we'll open it up for a discussion.
02:24 Over to you.
02:28 Uh,
02:28 Xena,
02:28 let me show you the slide.
02:41 Uh,
02:42 so thank you very much.
02:43 Um,
02:44 I'm Sina Attesh from the board and happy
02:46 to talk about international trade and dyna uh,
02:48 from dynamism,
02:50 dynamics and economic development,
02:51 our joint work with Yonkun,
02:53 and the usual,
02:54 uh,
02:54 board and IMF disclaimers about,
02:56 uh,
02:57 about employees' work,
02:58 of course,
02:58 applies here.
03:00 So,
03:00 uh,
03:00 just briefly about the outline,
03:02 uh,
03:02 of today's talk.
03:04 So I'm gonna first start with,
03:05 um,
03:07 some,
03:07 uh,
03:07 key highlights from the literature on international,
03:10 like openness to trade or more broadly
03:12 international linkages and how they affect growth like the key channels.
03:16 Then I'm going to focus a little bit on the,
03:18 uh,
03:18 technological competition side like or foreign competition,
03:21 how it can foster.
03:23 Uh,
03:24 technology upgrading,
03:25 uh,
03:26 among domestic,
03:26 uh,
03:27 domestic firms and what type of policies can indeed,
03:30 uh,
03:31 support,
03:31 support this relationship.
03:33 And in light of this discussion,
03:34 Yongong will continue,
03:36 um,
03:37 with,
03:37 uh,
03:37 a refreshing look and like with no facts on the long-lasting development process
03:42 of South Korea
03:44 and
03:44 what type of industrial policies indeed supported,
03:47 uh,
03:47 supported this,
03:48 uh,
03:49 persistent,
03:49 uh,
03:50 development experience.
03:52 So with that,
03:54 let me
03:54 uh go into the key channels that are highlighted in the literature
03:59 on international trade and economic growth.
04:02 Uh,
04:02 there's a large body of work
04:04 that uses as a natural uh natural experiment,
04:08 the,
04:09 uh,
04:09 trade liberalization episodes in,
04:11 in Different countries.
04:13 Most of these
04:14 work,
04:14 uh,
04:15 relates to developing countries like the,
04:17 uh,
04:18 experiences of Latin American countries over 1991980s,
04:22 1990s,
04:24 and,
04:24 um,
04:25 the first channel that,
04:26 uh,
04:26 that is emphasized by this work is
04:29 The access to
04:31 better inputs,
04:31 so inputs that can be,
04:33 uh,
04:33 that can be imported from,
04:35 uh,
04:35 from abroad,
04:36 which can help,
04:37 uh,
04:38 firms improve their productivities.
04:40 Market size is a second channel,
04:42 uh,
04:43 in this,
04:43 in this literature,
04:45 so opportunity to access broader markets can,
04:48 uh,
04:48 induce firms indeed to improve their products and processes.
04:53 A third channel
04:55 is
04:56 the competition aspect
04:59 of trade liberalization on which I'm going to spend a little bit more time,
05:02 uh,
05:02 later,
05:02 so I'm skipping it right now.
05:04 But
05:05 a key highlight from,
05:07 uh,
05:08 from this body of work is indeed
05:10 that there's some heterogeneity,
05:12 uh,
05:12 in the effect of this liberalization episodes on,
05:15 on firm dynamics.
05:17 So firms
05:18 that are readier to begin with,
05:20 let's say that,
05:21 that have a high productivity or that are more and the intensive,
05:25 uh,
05:26 uh,
05:27 before,
05:27 before trade liberalization episodes
05:29 actually happen to gain more,
05:31 uh,
05:32 from,
05:32 uh,
05:32 from these episodes,
05:33 like,
05:34 uh,
05:34 an important heterogeneity that I'm gonna highlight later,
05:37 uh,
05:38 in my talk.
05:39 And another channel
05:41 on which there's vast and expans uh
05:44 expanding,
05:45 uh,
05:45 literature,
05:46 um.
05:48 Is the knowledge spillovers and technology transfers
05:52 across,
05:52 across countries.
05:54 Uh,
05:54 so
05:55 there's a body of work,
05:56 uh,
05:56 in this literature that,
05:58 uh,
05:58 compares and contrasts the importance of technological,
06:02 technology adoption versus,
06:03 uh,
06:04 standalone innovation
06:05 over different phases of,
06:07 uh,
06:08 economic development.
06:09 Indeed,
06:09 Yong Hong's work,
06:11 recent work,
06:11 uh,
06:12 sheds like,
06:13 uh,
06:14 Uh,
06:14 a new,
06:15 uh,
06:16 a fresh look,
06:17 uh,
06:17 on these dynamics
06:19 that he's gonna,
06:20 that he's gonna discuss,
06:21 uh,
06:21 in his part.
06:22 A related literature here is the,
06:24 uh,
06:25 cross-border flows of investment,
06:27 particularly foreign direct investment
06:29 and the associated,
06:30 uh,
06:31 technology transfers.
06:33 So a recent work here to emphasize,
06:35 I think is
06:36 uh by Chris Frans Rosen,
06:38 Shebnam Kalis Jan,
06:40 uh,
06:40 and,
06:40 and co-authors who highlight that not only the firms that
06:44 see FBI benefit from associated knowledge spillovers and technology transfers,
06:49 but also
06:50 other firms in,
06:51 in similar sectors operating
06:53 uh with similar technologies happen to,
06:56 uh,
06:56 benefit from these flows as well.
06:58 Um,
06:59 in,
06:59 in,
07:00 in recent and related work,
07:02 we also
07:03 highlight that
07:04 FDI flows can indeed
07:07 help
07:08 or alleviate negative implications of uh of
07:12 market concentration in a domestic economy.
07:14 We indeed document that.
07:15 In more concentrated sectors,
07:18 domestic firms,
07:19 uh,
07:20 benefit more from FDI flows in terms of their productivity growth.
07:24 And again,
07:24 not just the firms that receive those flows,
07:27 but
07:27 other firms in the same sector.
07:29 So
07:30 FDI flows and associated technology,
07:33 uh,
07:34 uh,
07:34 technology transfers
07:36 may,
07:36 uh,
07:37 help with business dynamisms in domestic,
07:39 um,
07:40 in the receiving or the,
07:41 in the host countries,
07:42 um,
07:43 uh.
07:44 Uh,
07:46 supporting business dynamism in more concentrated sectors.
07:49 So,
07:50 uh,
07:51 in another recent work,
07:52 actually,
07:53 we look at,
07:54 at,
07:54 at,
07:54 at the uh
07:56 similar relationship,
07:58 uh,
07:58 in cross-border flows that are going in the reverse direction that,
08:02 that are,
08:02 that is more,
08:03 uh,
08:03 or less explored in the literature.
08:06 So if you,
08:06 if you go to the next slide,
08:08 Yono.
08:09 So,
08:10 uh,
08:11 now we look
08:13 at
08:13 foreign firms' investments in
08:16 countries that are indeed at the technology frontier.
08:19 So we look at the transactions between foreign firms
08:22 that are investing in,
08:24 uh,
08:24 US startups that are,
08:25 uh,
08:26 at their,
08:26 at the frontier.
08:28 So,
08:29 um,
08:29 what we document here is that,
08:31 of course,
08:32 as might be expected,
08:33 firms that invest in those US startups,
08:35 increase patenting in,
08:37 in those technologies and also increase their citations
08:40 to the patent portfolio of those startups.
08:43 But again,
08:43 this is not just them.
08:45 Also,
08:46 other firms,
08:47 uh,
08:47 in the same sector with this investing foreign firm
08:51 increase their patenting in those technologies and again citations to the,
08:54 uh,
08:55 patent portfolio,
08:56 uh,
08:57 of the US,
08:58 US firms in that technology.
08:59 So
09:00 the knowledge spillovers that are coming from those transactions from these,
09:04 uh,
09:05 investments
09:05 abroad
09:06 actually is broader
09:07 and concern,
09:09 not just the firm that is investing.
09:11 And another interesting fact that we that we highlight
09:14 is that these effects are indeed larger and stronger
09:18 in sectors that rely more on basic technologies,
09:23 so technologies that require
09:25 a larger upfront investment in like in
09:29 in fundamental research in human capital,
09:33 and indeed
09:34 firms are apparently like
09:36 more laggard foreign firms invest in US dollars or
09:40 Firms that are at the technology frontier to
09:42 acquire knowledge and to build up capacity,
09:45 uh,
09:46 faster in such technologies and,
09:48 um,
09:50 WDI actually emphasizes a lot like the importance of human capital.
09:54 So apparently there might be complementarities
09:56 coming from these type of investments,
09:58 uh,
09:59 learning
09:59 and acquiring frontier technology
10:02 through such investments and,
10:03 uh,
10:04 which can
10:05 help improve also
10:07 human capital and associated technologies,
10:09 uh,
10:10 in the,
10:11 in the foreign country.
10:13 So with that,
10:14 uh,
10:15 let me now switch to the,
10:16 uh,
10:17 final,
10:18 uh,
10:19 feature that I want to highlight that is associated with,
10:21 uh,
10:22 openness to trade,
10:23 uh,
10:24 the competition aspect,
10:25 which is,
10:26 uh,
10:26 the more contentious aspect,
10:28 uh,
10:28 of openness to trade.
10:30 So in recent work again with Ufuk Akjeed and Jean-Marie Implotti,
10:34 we
10:35 uh tackle indeed this,
10:37 uh this perennial question of how to manage
10:41 uh
10:42 intensified competition that is exerted by foreign
10:45 firms and what policies can help them.
10:47 Domestic firms
10:48 in such competitive,
10:49 uh,
10:50 competitive rates.
10:51 So whether tariffs or protecting these firms from competition is the,
10:55 uh,
10:55 better way to go,
10:56 or
10:58 whether supporting these firms,
10:59 these domestic firms through R&D subsidies
11:01 is more welfare enhancing.
11:04 And we look at these policies also
11:06 considering differences between the short run and long run,
11:09 like differentiating between different horizons of,
11:12 uh,
11:12 of policymakers.
11:15 So,
11:16 a key,
11:17 uh,
11:18 part
11:18 of our analysis or of the framework that we use in this,
11:22 in this work
11:23 is that
11:23 while it is encompassing,
11:25 like many features or aspects of openness to trade that I was highlighting,
11:30 uh,
11:31 while
11:33 While capturing these aspects,
11:34 it also
11:36 looks or like captures explicitly
11:39 the heterogeneous effects that competition
11:42 has on domestic firms.
11:44 So there's this,
11:45 there's of course the very important concern that keeps
11:49 Rising in policy discussions
11:50 that foreign competition from like better,
11:54 like exhorted by better firms that are at the technology frontier
11:57 can drive domestic firms,
11:59 uh,
12:01 can cause domestic firms to lose their market share or even exit the markets.
12:06 And indeed,
12:07 our model captures these dynamics,
12:09 but there's also another side of competition,
12:11 which is
12:12 competitive pressures can incentivize
12:14 some domestic firms
12:16 to improve their products and processes just to be able
12:19 to compete and or overcome their uh foreign rivals.
12:23 But of course,
12:24 which dynamic will play out
12:26 depends on the,
12:27 uh,
12:28 on the difference between the rivals,
12:29 just like in a,
12:30 in a race of,
12:31 in a running race,
12:32 right?
12:33 If the two competitors are close to each other,
12:35 there's the hope or potential of
12:37 overcoming your competitors,
12:39 just exerting a little bit more effort.
12:41 But if the difference between the 22 rivals is
12:45 very wide,
12:46 the laggard,
12:46 uh,
12:47 the laggard runner or the laggard firm
12:50 loses the hope of overcoming its rival,
12:53 capturing markets,
12:54 so it gets discouraged and relaxes its innovation effort.
12:58 So the framework,
12:59 as you see,
13:01 Relates technological differences to the dynamics of competition,
13:05 and those affect the dynamic incentives,
13:07 forward-looking investment incentives of,
13:10 uh,
13:10 of,
13:10 uh,
13:11 both domestic and foreign firms.
13:14 And this type of heterogeneity
13:16 indeed speaks very much to the extensive empirical work
13:19 that highlights these
13:21 different dynamics.
13:23 So just to highlight,
13:24 uh,
13:25 in the next slide,
13:25 just to highlight
13:27 how
13:28 uh this relationship between competition and innovation effort,
13:31 uh,
13:31 transpires in the model
13:33 on,
13:33 in the left panel.
13:34 I show again from the calibrated model,
13:37 the innovation effort of a generic firm
13:40 in the model
13:41 as a function of its position
13:44 relative to its foreign rivals.
13:45 So basically as a function of the technology gap between the two,
13:48 between the two firms.
13:49 As you clearly see,
13:50 there are two spikes.
13:52 Let me briefly explain,
13:53 uh,
13:53 what they mean.
13:55 On the left,
13:57 This concerns a domestic firm that is slightly
13:59 inferior in technology than its foreign rival,
14:02 but there are trade costs,
14:03 so importing those better goods is costlier
14:08 due to these trade costs.
14:09 So as a result,
14:10 this
14:11 domestic firm that is slightly inferior still has
14:14 some,
14:16 some food in the game.
14:18 So it can compete with the,
14:20 with the foreign rival.
14:21 So when their technologies are close to each other,
14:23 whilst accounting for the extra costs of importing,
14:27 the domestic firm exerts more innovative effort just to
14:31 be able to defend its domestic market against,
14:33 against,
14:34 um,
14:35 this foreign rival.
14:36 What happens around the uh rights spike
14:39 is basically,
14:41 it is about the
14:42 domestic firms that are,
14:44 uh,
14:44 that have better technology than their foreign rivals,
14:47 but they can't,
14:48 it is not enough to export to the other
14:50 markets because they also need to overcome this higher,
14:52 these,
14:53 um,
14:54 these higher costs associated with trade,
14:56 be it like iceberg costs or higher tariffs,
15:00 like,
15:00 uh,
15:01 tariffs,
15:02 um,
15:04 put in place by the,
15:05 by the other country.
15:07 So,
15:07 but if the domestic firm is
15:10 closing competition,
15:12 so if it can improve its product,
15:14 product quality a little bit more
15:16 and overcome
15:17 its rival and the uh trade costs,
15:20 it can
15:21 gain access to export markets.
15:22 So it intensifies its innovation efforts.
15:24 So as you see,
15:25 there are two regions where
15:28 Technologies get closed and competition stiffens,
15:31 and domestic firms are incentivized to,
15:34 to exert more innovative effort.
15:36 And interestingly,
15:37 we see a similar pattern in the data on the right,
15:39 uh,
15:39 on the right panel
15:41 to show that if you create a measure of technology gaps in the data
15:44 and then look
15:45 like the uh
15:48 Uh,
15:48 the,
15:49 uh,
15:50 innovate innovation in uh,
15:52 intensity of domestic firms,
15:55 in this case,
15:55 the US firms,
15:56 you see a similar pattern of,
15:58 uh,
15:59 double peaks like where uh innovation in,
16:01 uh,
16:02 intensity actually uh intensifies.
16:05 Uh,
16:06 so this is a reassuring and validating,
16:09 uh,
16:09 evidence for the mechanism that we are talking about here in this one.
16:13 So just to
16:15 Recap the policy implications of this model.
16:20 importantly,
16:20 there are two sides to policy.
16:22 Like there,
16:22 there are,
16:23 first,
16:23 the aesthetic effects and the dynamics,
16:25 dynamic effects.
16:26 So,
16:27 uh,
16:27 for instance,
16:28 consider
16:28 a unilateral increase,
16:30 uh,
16:31 like protectionist policies,
16:32 a unilateral increase in trade barriers on imports.
16:37 So in that case,
16:38 Domestic firms,
16:40 or dome domestic country can indeed
16:44 Potentially benefit from such policies,
16:47 but,
16:47 uh,
16:47 shifting production and profits
16:50 to home.
16:51 Like,
16:51 so protecting firms or increasing barriers
16:54 against imports,
16:55 uh,
16:56 means import becomes more costly
16:58 and production shifts to domestic firms.
17:00 But there are dynamic consequences.
17:02 Such policies can hurt forward-looking incentives of,
17:05 of such firms,
17:06 as I was showing.
17:07 If barriers are higher against imports,
17:10 so domestic firms are just shielded from competitive pressures,
17:13 and they don't need to exert
17:16 as much effort in improving their product qualities or processes,
17:20 so
17:20 they,
17:21 they,
17:21 they exert less effort to improve technologies.
17:24 So as a result,
17:25 what we find is
17:26 Profit shifting motives are actually
17:29 dominant
17:30 in terms of welfare only
17:32 when a few years ahead are considered.
17:35 So if the policy horizon is longer than that,
17:38 just beyond a few years,
17:40 or maybe unfortunately like longer than a,
17:44 longer than a presidential term.
17:46 Then the dominant,
17:48 uh,
17:49 effect is coming from the negative dynamic consequences
17:52 because firms are not exerting enough effort
17:55 as they don't feel much competitive pressure.
17:58 Indeed,
17:58 what we find is the optimal trade policy is to slash tariffs to zero
18:03 if the policy horizon in consideration is just beyond
18:06 a few,
18:07 uh,
18:07 a couple of,
18:08 a couple of years.
18:09 And the optimal subsidy,
18:12 sorry,
18:12 optimal policy
18:13 for a policymaker that is concerned over that
18:17 is concerned about the medium to longer term.
18:19 So a policymaker
18:22 who is non myopic,
18:23 the optimal policy is
18:25 using R&D subsidies.
18:26 So basically,
18:28 Supporting firms in the competitive rate instead of
18:31 killing competition and the associated incentives,
18:34 uh,
18:35 with higher barriers to trade.
18:36 And we also document
18:38 a policy complementarity.
18:39 So in a world that is more globalized,
18:43 defined by lower bilateral tariff rates,
18:45 there's less need to intervene via R&D subsidies just because markets.
18:49 And competitive pressures take care of,
18:52 uh,
18:52 appropriate incentives just by themselves,
18:54 uh,
18:55 forcing firms to,
18:56 to increase their innovative efforts.
18:59 But let me conclude on my last slide just with some policy.
19:04 Implications for developing countries
19:07 that are,
19:07 uh,
19:08 that are facing,
19:09 uh,
19:09 some challenges in their,
19:11 uh,
19:11 in their middle income base.
19:14 So of course,
19:15 every,
19:15 every economic economic analysis and model abstracts
19:18 from some considerations and of course,
19:19 there are valid considerations uh surrounding such policies like,
19:23 uh,
19:24 uh,
19:25 removing trade barriers,
19:26 for instance,
19:27 just outright
19:28 might entail other considerations like they,
19:31 they might generate great dislocations.
19:33 There might not the transition of the firms to innovate,
19:37 uh,
19:37 activities might not be as smooth.
19:40 But I think the importance of our policy implications are not just
19:43 the
19:44 exact uh policies per se,
19:46 but more about
19:48 what the goal or the uh direction of policies should be.
19:53 What we highlight is the protectionism.
19:56 Basically distorts
19:57 forward looking incentives of firms
19:59 and indeed
20:00 if
20:01 if a country after years of protectionist
20:03 policies wants to decrease these barriers,
20:06 it might find itself in a
20:08 worse position than it would be
20:10 in an alternative or counterfactual economy where
20:14 trade barriers were lower to begin with just because
20:17 firms
20:18 were shielded from competition and they were not
20:21 exerting enough effort in technology upgrading.
20:24 And indeed,
20:26 indeed history is bright with these examples,
20:28 right?
20:29 Like uh examples of import competition that Latin American countries or,
20:33 um,
20:33 like Turkey
20:35 over 1960s and 1970s,
20:37 leftist countries,
20:38 uh,
20:39 with firms that are dependent on state support and not ready to compete,
20:43 uh,
20:43 with foreign rivals once the,
20:45 uh,
20:46 uh,
20:46 trade barriers were,
20:47 uh,
20:48 were,
20:48 uh,
20:49 removed.
20:50 So as a result,
20:51 what we highlight is that the goal needs to be
20:54 to support firms to build up capacity to compete,
20:57 to upgrade their technologies and
21:00 to be ready to innovate in the future.
21:02 I think in this sense,
21:04 Korea's example is very telling that they have been steadily.
21:08 Increasing their,
21:09 uh,
21:09 their,
21:10 their import tariffs over the development stage,
21:13 while at the same time supporting their firms
21:15 to invest in technologies,
21:17 uh,
21:18 both via imitation and also innovation policies,
21:21 as Yongoon's recent work,
21:23 uh,
21:23 high,
21:24 highlights,
21:24 uh,
21:25 very clearly.
21:26 And with that,
21:27 let me,
21:27 uh,
21:28 leave the stage to Yong Hoon,
21:30 uh,
21:31 for,
21:31 uh,
21:31 for his talk on South Korean experience.
21:34 Thank you very much.
21:37 OK.
21:38 Thanks,
21:38 uh,
21:39 thanks for having me.
21:40 So I'm gonna present the second half of the presentation,
21:43 and I would like to zoom into a specific case,
21:45 which is South Korea.
21:47 So here,
21:48 we plot the GDP per capita of South Korea in the red line
21:52 with other different countries.
21:54 So here we can see that at the beginning in the 1950s,
21:57 Korea started as one of the lowest income countries
22:00 like China,
22:01 India,
22:02 or Vietnam.
22:03 And in the 1980s,
22:04 it caught up with some middle income countries like Brazil,
22:08 Mexico,
22:09 and Turkey.
22:10 But even after that,
22:11 Korea kept growing,
22:13 and now it is in the process of catching up with some of the high-income countries
22:17 like Japan,
22:18 France,
22:18 or the US.
22:20 And behind this development,
22:23 there are,
22:23 there were several industrial policies
22:26 during that development period.
22:28 So the first industrial policy was sector-specific policy.
22:32 Where the government was trying to support the heavy manufacturing sector.
22:36 So there are several papers documenting this policy,
22:39 and it turns out that this policy was effective
22:42 at transforming the country from
22:44 non-manufacturing
22:46 or light manufacturing intensive economy
22:49 to more heavy manufacturing intensive economy,
22:52 which is more export-oriented.
22:55 And also at the same time,
22:57 there was a trade policy
22:58 where as Sina mentioned briefly,
23:01 the government was reducing the import tariff
23:04 while the country was catching up with the frontier countries.
23:08 And the 3rd industrial policy was
23:10 somewhat implicit in a sense that
23:13 they were implicitly
23:14 picking the winners in a sense that
23:16 they look for the firms
23:18 and they
23:19 kind of point out the successful ones at the beginning
23:22 and then they keep subsidizing these large incumbents conditional on that
23:27 they're
23:28 exporting their goods to other countries.
23:31 So we have recent work,
23:33 uh,
23:33 documenting these patterns by looking at the
23:35 capital and labor wedge of these superstar firms
23:38 and study the impact of these,
23:40 uh,
23:41 uh,
23:41 policies on the increased,
23:43 uh,
23:44 market concentration over time.
23:46 And the last one is the technology policy,
23:49 where the government
23:50 first
23:51 started by subsidizing technology adoption,
23:54 and then they shifted toward innovation subsidy.
23:57 And this will be my focus on this today's presentation.
24:02 So here,
24:03 we
24:04 plot the technological growth of South Korea
24:07 with two different measures.
24:09 First one in the red line is the number of patents
24:12 per 1000 people.
24:14 So we can see at the beginning in the 1980s,
24:17 the number of patents per capita is almost zero,
24:20 but it rapidly grew over time,
24:23 and in 2020,
24:24 it is almost like 3 per 1000 people,
24:27 which is the uh one of the highest numbers in the world.
24:30 And the second measure is R&D intensity,
24:32 which is R&D expenditure over GDP in the blue line.
24:36 And we can see that
24:38 again in the 1980s,
24:40 R&D intensity is almost zero,
24:42 but it grew rapidly and now it is like 4%,
24:46 which is,
24:47 which is the second highest number
24:49 among the OECD countries.
24:52 So our question is,
24:53 how this country transformed from non-innovative country to innovative country.
24:59 And to see it more clearly,
25:01 let me zoom into a specific case of the firm,
25:04 which is Samsung Electronics.
25:07 So in 1938,
25:09 Samsung Electronics was founded.
25:12 Although Samsung Electronics is now nowadays one
25:14 of the largest companies in the world,
25:17 but at the beginning it started just as a small company
25:20 that made a noodle.
25:22 In 1969,
25:23 they decided to enter an electronics industry,
25:26 but of course,
25:27 they didn't have any technologies to develop any kinds of electronics products.
25:31 So to tackle this problem,
25:33 they decided to adopt
25:35 some technologies from foreign companies,
25:38 and they managed to sign a first technology transfer contract
25:42 with a Japanese company called Sanyo.
25:45 So under this contract,
25:46 Samsung pays an adoption fee to the Japanese company
25:50 and Sanos uh agrees to share the blueprints of the technologies
25:55 and provide know-how transfer in a sense that
25:58 they invite some of the Korean engineers to their factories
26:02 and teach them how to use certain types of
26:05 types of machines
26:06 or
26:07 teach them how to produce a black and white TV basically.
26:11 And this was a very successful adoption,
26:13 and Samsung Electronics was quite aggressive in adopting other technologies
26:19 um uh from the frontier companies.
26:22 But in 1980s,
26:23 it becomes harder and harder to adopt these technologies
26:27 for two reasons.
26:28 First,
26:29 uh,
26:29 these Japanese companies become more reluctant to share the technologies.
26:33 Why?
26:34 Because Samsung,
26:34 as Samsung becomes a,
26:36 a large company
26:37 and becomes a larger competitor to these Japanese companies,
26:41 these Japanese companies
26:43 don't want to share this technology with Samsung.
26:46 So sometimes they refuse to share the technology
26:49 or basically raise the price of the technology.
26:52 And the second reason is that
26:54 as Samsung grew,
26:56 there are not many things to learn from the Japanese companies.
27:00 Of course,
27:00 Japan was producing better TV
27:03 than Korean company,
27:05 but still they are in the same bandwidth,
27:07 so there are not,
27:08 there are not many things to learn from these Japanese companies.
27:12 So in,
27:13 at the end of like the 1980s,
27:15 Samsung decided to innovate their own technologies
27:19 by,
27:20 by investing a lot of money in R&D
27:22 and hiring some scientists from the university.
27:26 And then they managed to develop their own technologies
27:29 and their own products.
27:32 At the same time period,
27:33 the government was quite
27:35 active.
27:36 In subsidizing this technology investment.
27:40 In particular,
27:41 they started by subsidizing adoption
27:43 and then shifted toward innovation subsidy.
27:46 So here in the left-hand side,
27:47 we plot the adoption and innovation subsidy rate over time,
27:51 which is tax credit for the adoption fee
27:54 or R&D expenditure.
27:56 We can see that it started by subsidizing adoption at 30%,
27:59 but it gradually decreased over time,
28:02 while the innovation subsidies started a little bit later than that,
28:05 but it gradually increased over time.
28:09 So when we look at the aggregate data,
28:11 which is adoption expenditure shared,
28:13 adoption expenditure over adoption,
28:15 and R&D expenditure,
28:17 we can see that the firms
28:19 were transforming from adoption
28:21 toward innovation
28:23 as the country develops over time.
28:28 So,
28:28 uh,
28:29 let me introduce the data what we,
28:30 uh,
28:31 that we are using in that paper
28:33 and then present two empirical facts out of it.
28:36 So the data,
28:36 the,
28:37 the main data we are using is the technology transfer contracts between Korean
28:41 and foreign firms
28:42 from 1962 to 1993.
28:46 So here,
28:46 we went to the National Archives and we digitized
28:49 the official documents between the Korean and the foreign firms
28:54 where they are uh where they are um
28:57 uh trading the technologies.
29:00 So here we can capture the universe of these contracts because at that time period,
29:05 firms have to report all of their transactions involving foreign currencies.
29:09 And we can see 50% more than the majority
29:12 of the adoption contracts were with Japanese firms,
29:15 and the remaining 25% were with US firms,
29:18 and most of the contracts were in the manufacturing sector.
29:23 Using this data,
29:24 we merge this data with the firm balance sheet data so that we can see the
29:27 basic information of the firms and also the
29:30 patent data so that we can measure the innovation
29:33 at the firm level.
29:35 So here,
29:36 I'm gonna present two empirical facts.
29:38 First,
29:39 when the initial productivity gap between the
29:42 technology buyer and the seller is larger,
29:45 then the productivity growth after adoption
29:48 is larger.
29:50 So here in the y axis,
29:52 we plot the productivity growth after 5 years from adoption,
29:56 which is measured by sales for employment growth at the firm level.
30:01 And in the x axis,
30:02 we plot the productivity gap between these two firms,
30:05 which is measured by the ratio of sales per employment of the Korean firm
30:09 divided by the sales per employment of the foreign firm.
30:13 So we can see that
30:14 uh when the Korean firm has a much less productivity
30:18 than the foreign firm,
30:20 which means that they are lagging behind the foreign firms.
30:23 The productivity growth after adoption is larger.
30:27 However,
30:28 as the Korean firms are catching up with the foreign firms,
30:31 so that they have more or less similar productivity,
30:34 then the productivity growth after adoption
30:37 becomes much smaller.
30:40 On the other hand,
30:40 when we plot this same exercise
30:43 with the innovating firms,
30:45 we can see that the innovating,
30:46 uh,
30:47 the productivity growth after innovation
30:49 is basically flat
30:51 over this initial productivity gap.
30:54 Which means that,
30:55 uh.
30:56 The productivity growth after adoption
30:59 depends a lot on the initial productivity gap
31:02 compared with the innovation.
31:04 And also on top of that,
31:05 when the when the firms are lagging behind,
31:08 then the adoption brings larger productivity growth
31:12 than the innovation.
31:14 But on the other hand,
31:15 when the firm is catching up with the foreign firms,
31:18 innovation brings larger productivity gain than the adoption.
31:24 The second fact that I want to deliver here is that
31:27 non-addopters also get knowledge diffusion from these adaptive technologies.
31:33 So to see that,
31:34 let's suppose a simple situation where Samsung adopted technology from SAO.
31:40 Which is a Japanese firm,
31:41 but not from Panasonic.
31:44 And our question is,
31:46 do other firms
31:47 that did not directly adopt this technology
31:50 are also getting knowledge diffusion from this adaptive technology.
31:55 To see that,
31:56 we follow the innovation literature and we assume that
32:00 if patent A makes a citation to patent B,
32:03 it means that patent A is learning something from patent B
32:07 and is building on top of patent B.
32:10 And if that's the case,
32:12 then these other firms
32:13 should increase the patent citation
32:16 towards Sanu.
32:18 Compare with the Panasonic firm,
32:20 a Panasonic pattern,
32:21 which is a plus b firm.
32:23 So the basic idea is to plot the difference of citation between the seller
32:28 and the plausible firm
32:30 around the first technology adoption.
32:33 So this is the result,
32:35 and we can see that
32:36 after several years from the first technology adoption,
32:39 we can see that the other firms
32:41 that did not directly adopt this technology
32:45 also increased patent citation
32:47 to this adaptive technology,
32:49 which means that
32:51 when other firms are adopting the technology,
32:54 I can also learn something from this adapted technology,
32:57 which implies that there is some
32:59 knowledge spillover from these adoption activities.
33:03 So those are basically two facts,
33:05 and let me explain the takeaways.
33:08 So the technology adoption can bring larger productivity gain
33:12 when the gap between the uh the firm and the frontier firm is larger.
33:17 And adoption also brings knowledge diffusion,
33:21 which can potentially cause underinvestment problem of the firms because
33:25 these are private firms do not internalize this knowledge diffusion.
33:30 So subsidizing adoption
33:32 can be very effective at the early stages of development.
33:36 However,
33:37 as we saw in the uh empirical fact,
33:40 the gain from adoption will diminish
33:42 as the country catches up
33:44 with the frontier countries.
33:46 So we have this basic idea and we quantify the policy implications
33:51 using two contrite growth models with endogenous adoption
33:54 and innovation decisions.
33:58 So here we
33:59 came back to the uh
34:01 the adoption and innovation subsidy of South Korea,
34:04 and then we put it
34:05 in the model
34:06 and then we're trying to compare the actual policy with no subsidies.
34:11 Or what if we just subsidize adoption and never switch to innovation?
34:16 Or lastly,
34:16 what if we just started by subsidizing innovation
34:20 and never subsidize adoption?
34:22 So basically,
34:23 we do some kind of simulation using the model.
34:27 And then here's the result.
34:29 So here's the case when we subsidize only adoption
34:33 for the whole period
34:34 with the same uh subsidy rate.
34:37 And this is the,
34:38 in the right-hand side,
34:40 this is the GDP relative to the no subsidies case.
34:44 So here we can see at the beginning,
34:46 GDP is
34:47 a little bit smaller than the no subsidies case.
34:50 Because
34:51 we are using uh more labor
34:54 into adoption activities.
34:56 Other than,
34:57 uh,
34:58 uh,
34:58 instead of production.
35:01 But
35:02 in the beginning,
35:03 it has a much higher growth rate.
35:05 So GDP already caught up with the no subsidy case
35:09 and it is much larger than the no subsidy case.
35:13 More importantly
35:15 This deviation from the no subsidy case
35:18 does not grow exponentially,
35:20 which implies that
35:22 subsidizing only adoption
35:24 does not increase long run growth rate.
35:27 This is because,
35:28 first,
35:28 the gain from,
35:29 uh,
35:30 productivity,
35:31 the gain from adoption
35:32 will diminish
35:35 as the,
35:35 as the,
35:36 as the Korean firms are catching up with the Japanese firms.
35:40 And also subsidizing adoption
35:42 will,
35:43 will,
35:44 will make the Korean firms stuck at the adoption phase
35:47 in a sense that
35:48 since the adoption is cheaper than the market price.
35:51 Even if they can
35:53 fully catch up the Japanese firms
35:54 and leapfrog the Japanese firms by innovating their own technologies,
35:59 they're just keep waiting
36:01 for the Japanese firms to innovate,
36:03 and they are just adapting and following the Japanese firms' technology
36:07 whenever the Japanese firms innovate their own thing.
36:10 So it it it actually.
36:13 Can reduce the long-run growth rate.
36:16 On the other hand,
36:17 when we subsidize only R&D or innovation,
36:20 at the beginning,
36:21 it has a much smaller GDP than the adoption subsidy only case,
36:26 because at the beginning,
36:27 adoption is much more effective than the innovation,
36:30 but subsidizing innovation instead adoption
36:32 can be distorted.
36:34 But in the end,
36:35 it has a higher long run growth rate.
36:38 So in the end,
36:38 after like 40 years,
36:40 it can uh catch up with the adoption subsidy case.
36:44 Now we
36:46 plug in the actual policy.
36:49 Since the actual policy gradually shifted
36:51 toward innovation subsidy from adoption subsidy.
36:55 At the beginning,
36:55 it closely followed the adoption subsidy case,
36:58 and as the
36:59 government switched to innovation subsidy,
37:02 the long run growth rate is also higher than the adoption subsidy case.
37:07 So in the end,
37:08 when we calculate the welfare compared with the no subsidy case,
37:11 we can see that the actual policy was the
37:13 most effective compared with the two time variant policies.
37:20 So I think uh I can conclude here.
37:22 So the,
37:22 uh,
37:23 the main message we want that we want to deliver here is that the policies
37:27 that were effective for developed countries
37:30 may not
37:31 work really well for developing countries.
37:33 And this state-dependent policy that started with
37:36 adoption subsidy and shifted toward innovation subsidy
37:40 was indeed very effective
37:42 in South Korea's development.
37:44 Thank you very much.
37:48 Thank you very much,
37:48 Yanha and uh Xina,
37:50 not only for the very uh useful presentation,
37:54 but sticking to time.
37:56 folk,
37:56 if you're connected,
37:57 would you like to provide some broader context before we open up to comments
38:02 or questions?
38:03 Mhm.
38:04 Uh,
38:04 uh,
38:04 absolutely.
38:05 So,
38:05 uh,
38:06 thanks,
38:06 thanks,
38:07 Jung and thanks,
38:07 Xina,
38:08 for,
38:08 for,
38:08 for this,
38:09 uh,
38:10 very nice presentation.
38:12 Uh,
38:13 so I,
38:14 you know,
38:14 the,
38:14 the main,
38:15 the main takeaways that I,
38:17 uh,
38:17 that I see in,
38:18 in,
38:19 in their presentation is that,
38:21 uh,
38:22 first,
38:23 the,
38:24 the optimal growth strategy is clearly,
38:26 uh,
38:27 stage dependent.
38:28 And,
38:29 uh,
38:30 so,
38:30 as a result,
38:31 you know,
38:31 not only,
38:32 not only the,
38:33 the firms have to be dynamic along the development stages.
38:37 But also the policies,
38:38 the optimal policies,
38:40 the policymakers have to be dynamic as well.
38:42 And I think,
38:43 you know,
38:44 uh,
38:44 here,
38:45 uh,
38:45 Yong Hon is presenting obviously the,
38:47 the optimal policies,
38:49 uh,
38:49 along the way,
38:50 but there's also a major political economy problem,
38:53 you know,
38:53 changing the policies
38:55 is,
38:56 uh,
38:56 is,
38:56 is,
38:57 is,
38:57 is not easy,
38:58 uh,
38:58 uh,
38:59 and,
39:00 you know,
39:00 uh,
39:01 I think that's,
39:01 that's an important message.
39:02 The second one.
39:04 Uh,
39:04 uh,
39:05 is that
39:06 what is good for the society is not necessarily good for,
39:10 uh,
39:10 policymakers.
39:11 I think that's also a very important message that's coming out in the sense that,
39:15 uh,
39:15 if policymakers' horizon is,
39:17 is,
39:17 you'd say,
39:18 5 years,
39:19 which is the short run,
39:20 or at most 8 years,
39:22 in that case,
39:23 protectionist policies can be uh
39:26 uh optimal from a policymaker's point of view.
39:29 But if you care about the longer run of the economy,
39:33 Uh,
39:34 of course,
39:34 uh,
39:35 boosting the technology is much more important,
39:37 and to boost the technology,
39:39 international spillovers and the competition channel,
39:42 uh,
39:42 coming from
39:43 international trade is extremely critical.
39:45 So that's again,
39:47 I,
39:47 I just kept hearing tensions,
39:49 political economy in the background from this presentation,
39:52 which was very useful.
39:54 Uh,
39:55 um,
39:56 yeah,
39:56 so let me stop here and I'm,
39:57 I'm,
39:57 I'm curious about the,
39:59 uh,
39:59 the audience,
40:00 uh,
40:00 feedback to you.
40:01 Thanks for you raise important questions
40:04 that in the current environment where trade
40:07 restrictions,
40:08 at least in technology access to certain countries are being limited,
40:12 and what happens to their growth prospects.
40:14 OK,
40:15 colleagues,
40:15 uh,
40:15 uh,
40:16 please,
40:16 uh,
40:16 uh,
40:17 raise your hand and I'll turn to you,
40:18 uh,
40:19 if you have questions.
40:26 Everyone's very,
40:27 uh,
40:27 reserved,
40:28 I think,
40:28 today,
40:29 right?
40:29 So,
40:30 uh.
40:37 Questions,
40:37 uh,
40:38 I don't see folks with questions,
40:40 so,
40:40 uh.
40:44 Junghon,
40:44 I think one of the key issues going back to your simulation
40:48 is that you're saying this switch from
40:51 imitation subsidy to innovation subsidy was timed pretty well in Korea.
40:56 So what was it really that the Korean
40:58 government was doing in terms of gathering information,
41:02 able to,
41:03 to be able to,
41:04 you know,
41:05 figure this
41:06 switch out.
41:07 And second,
41:08 uh,
41:09 I think a lot of the debate.
41:11 If you look at
41:13 the Fabrizio Zindiboti's papers,
41:17 is that earlier on when you're imitating
41:19 a lot of bad practices and conglomerates can get you there.
41:23 But then when you're innovating,
41:25 you need to sort of
41:27 really get your competitive environment really well.
41:29 So how did,
41:30 what were the things happening in Korea when the switches were going on?
41:34 I see.
41:35 So,
41:36 uh,
41:36 basically,
41:38 so when there's,
41:39 there's,
41:39 there's like a big change over this time and also like this time.
41:44 That was quite
41:46 closer to the president's change.
41:49 So
41:50 as Wuu already mentioned,
41:51 there was like political constraint in a sense that
41:54 uh
41:55 uh during the incumbent presidency,
41:58 it is kind of harder to change the policy,
42:00 but after there's a new,
42:02 new president,
42:02 then it is relatively easier
42:04 to change the policy,
42:06 right?
42:06 And I think the main information that they were using is just the
42:10 GDP or like a very aggregate measure in terms of
42:13 like uh compare the GDP with the Japan or the US
42:17 and then try to figure out,
42:19 oh now we are,
42:20 we have to move on to innovation phase or something like that.
42:24 And
42:26 And I think
42:27 the second
42:29 question was,
42:30 uh,
42:30 OK,
42:31 so it's,
42:31 uh,
42:31 about the Zillipoti paper.
42:33 So there was also like an interesting paper,
42:36 another interesting paper
42:37 that talks about uh Asian financial crisis,
42:40 uh,
42:40 in 1997.
42:42 So after that,
42:43 there was like a reform,
42:44 like a lot of reform from,
42:46 uh,
42:46 from the fund,
42:47 and
42:49 When you see the entry rate or entry rate
42:51 in the patent data,
42:53 the entry rate went up after the financial crisis,
42:57 which
42:58 I believe that it was uh helping the dynamism of the economy was
43:03 going in the right direction.
43:05 So it was a crisis,
43:06 so it was a bad thing basically,
43:08 but it has some upside
43:10 from that crisis.
43:14 So,
43:15 so then if you look at the firms right now,
43:17 besides
43:18 your example,
43:19 which is very detailed on Samsung,
43:21 what is the general
43:23 marketplace for coming up with new ideas and innovations?
43:27 Is it largely
43:29 in a model where the largest firms
43:32 have R&D capabilities and technical capabilities,
43:35 or do you also see in the Korean market that a lot of change is being driven by these,
43:40 you know,
43:41 new entrants who are growing rapidly?
43:44 I see,
43:45 but still,
43:45 I mean,
43:46 even after this crisis,
43:47 still,
43:47 uh,
43:48 from the data,
43:49 what I see is the leading firm in this innovation is incumbent and large firms.
43:54 So for example,
43:55 like Samsung,
43:55 LG,
43:56 like Hyundai,
43:57 like,
43:57 uh,
43:57 are driving this innovation.
43:59 But the context is a little bit different from the US,
44:02 uh,
44:03 uh,
44:03 example in a sense that
44:05 they are all exporting firms,
44:06 so they are competing in the global market.
44:09 So even if they are concentrated in a domestic market,
44:12 they are not
44:13 dominating in the global market.
44:14 So in that sense,
44:15 it is kind of,
44:16 it can still be innovative
44:18 in that sense.
44:27 Colleagues,
44:27 any
44:28 questions from uh
44:31 Well,
44:31 you wanna come in with your question?
44:34 So far.
44:36 Just a,
44:37 just a quick um question slash clarification.
44:41 On,
44:42 on,
44:42 on this slide,
44:43 your,
44:44 your,
44:44 your model,
44:45 uh,
44:46 you know,
44:46 uh,
44:46 you have a small caption there saying government
44:49 spending is financed by a lump sum tax.
44:51 So your model is assuming no dead weight loss from taxation,
44:56 correct?
44:57 So
44:58 so
44:58 my,
44:59 my,
44:59 my question to you,
45:00 if you can clarify that,
45:01 but also reflect in the policy world,
45:04 when,
45:04 when we look at this,
45:05 um,
45:06 sort of.
45:07 Relative to no subsidy scenario,
45:09 these subsidies are being financed by distortive taxes
45:13 in,
45:13 in the real world.
45:14 So
45:14 the results will all,
45:16 you know,
45:17 at least,
45:18 uh,
45:18 you know,
45:18 will be lower than,
45:19 than,
45:20 than what you have in your chart
45:22 or,
45:22 or could be even different,
45:23 right?
45:24 Yeah,
45:24 I think that's a very good point.
45:26 So here to simplify the things,
45:28 we assume that they are collecting tax by lump sum tax.
45:31 But we have this additional parameter
45:33 that governs the inefficiency of uh imposing lump sum tax.
45:37 So now parameter is,
45:39 uh,
45:40 is 2,
45:41 from the literature,
45:42 which means that we have to uh collect $2
45:46 to use $1 for this,
45:48 uh,
45:48 this subsidy program.
45:50 So it is actually even larger
45:53 effect.
45:54 If we assume that there's no inefficient,
45:56 inefficiency,
45:57 uh,
45:58 at all
45:59 from the lump sum tax,
46:00 as you mentioned,
46:01 but we are adjusting the parameter to be more realistic.
46:07 Can I just add one more,
46:09 uh,
46:10 comment here,
46:10 uh,
46:11 to Yong-hun's answer.
46:13 So Jaffar,
46:14 you're,
46:14 you're,
46:14 you're
46:16 bringing an excellent point.
46:17 Uh,
46:18 this class of models that Yong-hun is building,
46:21 if you make
46:22 the policy
46:23 stage dependent,
46:25 the
46:27 That the model will
46:28 ask
46:29 you to have a lower tax on larger firms,
46:34 and this is because
46:35 to incentivize firms to be large,
46:38 you are promising some additional return if
46:42 you want to make the taxes distortionary.
46:43 You can,
46:46 in some sense put some backload of carrots
46:48 so that you can also use the tax policy
46:51 to create an additional incentive for firms to grow.
46:54 Right,
46:54 so,
46:55 uh,
46:55 first through the subsidy policy,
46:57 you're subsidizing imitation,
46:58 so that's good for the country,
46:59 but if you want to also exploit variation in tax policy,
47:03 these models will tell you that
47:05 lower the taxes as firms are growing,
47:07 then there will be a trickle down of incentives.
47:10 So if being large is,
47:11 is good,
47:12 then all the smaller firms will also try to be uh good.
47:15 So
47:16 these models,
47:16 these forward-looking uh uh competition models,
47:19 uh,
47:20 have that flavor.
47:21 So that's something that I wanted to clarify.
47:24 Uh,
47:25 one additional thing,
47:26 uh,
47:26 uh,
47:26 that I would like to also highlight is that,
47:29 uh,
47:29 in,
47:29 in Sinna's remark,
47:31 so he,
47:32 he made a point that's very,
47:33 I think,
47:34 fundamental for the WDR which is,
47:37 uh,
47:38 in,
47:38 in,
47:38 in,
47:38 in Sinna's presentation,
47:40 he was giving an example of an event
47:42 study where foreigners are investing in US startups,
47:46 but especially in basic fields,
47:48 in more technical fields.
47:50 So that already shows that in real life,
47:53 uh,
47:54 uh,
47:54 countries,
47:55 when they are not able to deliver innovation by themselves,
47:58 especially in technical fields that are requiring
48:00 more basic knowledge like academic knowledge,
48:02 for instance,
48:03 which they are not good at,
48:05 then they try to go and,
48:06 and source it at the,
48:07 uh,
48:07 uh,
48:08 at uh directly from the US.
48:10 So that interaction,
48:11 that complementarity is also very interesting.
48:14 Another
48:15 They invest but they us
48:18 which uh looks like exactly the message that,
48:20 uh,
48:20 you know,
48:21 the WDR is already,
48:23 uh,
48:23 uh,
48:23 building on.
48:25 Getting connected to the world,
48:26 especially in technical fields,
48:28 is more valuable for the country.
48:34 Thanks,
48:35 uh,
48:36 the folk,
48:36 uh.
48:40 Uh,
48:40 may I come in here?
48:41 Maybe,
48:41 uh,
48:42 you have a question,
48:43 right?
48:43 Please come in.
48:44 Yeah,
48:45 thank you.
48:45 I think actually it's a good uh segue.
48:48 Now,
48:48 I was wondering because you,
48:50 you,
48:50 you know,
48:51 by what you just said,
48:52 but also
48:53 in the presentation,
48:55 uh,
48:56 when giving the example of um
48:59 uh in
49:00 sort of the technological exchange,
49:02 uh,
49:03 with Japan,
49:03 you mentioned that uh engineers from Korea.
49:07 would go to Japan.
49:08 So I was wondering,
49:10 uh,
49:10 both in reality but also in your model,
49:13 how does the human capital development of Korea,
49:18 uh,
49:18 its path of human capital development enabled
49:22 these,
49:22 um,
49:23 technological upgrading strategy.
49:25 Thanks.
49:27 I see.
49:27 I think uh that human capital was extremely important in that period,
49:32 but just one thing is that we didn't have really good data to distinguish the policy,
49:37 so we only can look at the outcome of the education,
49:41 for example,
49:41 like a college entrance rate or graduation rate
49:45 is,
49:45 uh,
49:45 was much higher than other middle-income countries,
49:48 so that can uh reduce the
49:51 cost for innovation or adoption because uh smarter people can also innovate,
49:57 like,
49:57 uh,
49:57 I guess better and,
49:58 you know,
49:59 like adapt also better.
50:01 But here,
50:01 uh,
50:03 I'm,
50:03 I,
50:03 I can clearly see that uh there is a complementary
50:06 between the education policy and this innovation and adoption policy,
50:10 but here,
50:11 we didn't have really good data,
50:12 so that's why we just,
50:13 uh,
50:14 assume that this is constant over time.
50:27 But Rufuki had also looked carefully at the human
50:30 capital upgrading and technical skill development in Korea,
50:33 right?
50:34 So maybe you want to say something on this.
50:36 No,
50:37 that's,
50:37 uh,
50:37 that's absolutely right.
50:38 So in the,
50:39 in the,
50:39 in the main analytical framework
50:41 for the WDR,
50:43 uh,
50:43 there is already a,
50:45 uh,
50:46 a very clear message coming out,
50:48 which is,
50:48 of course,
50:49 uh,
50:50 in order to innovate,
50:52 you need to have good engineers,
50:53 educated engineers.
50:55 Uh,
50:55 if you have good engineers,
50:56 then your firms can become more innovative.
50:59 Uh,
50:59 but in the beginning,
51:00 you don't have that,
51:01 obviously.
51:02 So as a result,
51:03 you know,
51:03 either you can have an organic.
51:06 Uh,
51:07 education reform and have your human capital pool grown organically over time,
51:12 but that's going to be a long-lasting process.
51:15 So probably it will take 1015 years to improve the education pool in the country
51:21 because they need to also get technical training and also work experience.
51:25 An alternative is directly
51:27 to,
51:27 you know,
51:28 borrow engineers from uh uh.
51:32 Or uh utilize the diaspora.
51:35 Uh,
51:35 so those two things can also strengthen the talent pool,
51:38 uh,
51:39 relatively quickly,
51:40 and that can create a synergy between firms who are trying
51:43 to innovate versus the human capital that exists in the country,
51:47 and the,
51:48 the two can,
51:48 can,
51:49 and can,
51:50 uh,
51:50 deliver much more valuable output.
51:52 And that's exactly the main result that's emerging also from the
51:56 analytical framework that we are adopting for the World Development report.
52:01 That was a great point,
52:03 ER.
52:06 Right,
52:06 colleagues,
52:07 any other comments?
52:09 Please take the,
52:11 take advantage of our speakers and if any questions on,
52:16 especially on the trade issues
52:18 from Sina's review,
52:19 please come on in.
52:29 All right.
52:30 Uh,
52:30 it looks like we have no further questions.
52:32 So colleagues,
52:32 thank you very much for your time.
52:35 Uh,
52:35 Aung Hen and Sina,
52:36 thank you very much for joining us and presenting your work.
52:39 We are putting out the background paper on the WDR web page,
52:43 so you should be able to access that.
52:46 Uh,
52:46 this recording and slides will also be
52:49 be available.
52:50 We'll send out the announcement for next week's seminar soon,
52:54 so look forward to seeing you next Wednesday.
52:56 Thank you.
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