Agric. Econ. - Czech, 2014, 60(3):110-122 | DOI: 10.17221/118/2013-AGRICECON

Determinants of the Korean agricultural trade with the LDCs and the OECD countriesOriginal Paper

So Yeon LEE, Song Soo LIM
Department of Food and Resource Economics, Korea University, Seoul, Korea

The study aims to analyze Korea's import trade in agricultural products with (i) the least developed countries (LDCs) and (ii) the Organization for Economic Co-operation and Development (OECD) countries. Extended versions of a gravity model are adopted and the balanced panel data for the unilateral trade over the period of 2003 to 2008 are constructed using the Harmonized System Codes. The Heckman two-stage analysis is incorporated to detect the potential selection bias arising from many zero trades. We find that only preferential tariffs on the LDCs have significantly contributed to the trade flows. However, in contrast, gross domestic products (GDPs), free trade agreements (FTAs), the applied tariff rates, and the exchange rates turn out to be statistically significant in the trade with the OECD countries, thus highlighting the possibility of the potential trade benefits associated with the trade policy reforms. The study is unique in that it empirically estimates the determinants of agricultural trade between the LDCs and developed countries and reveals the potential effectiveness of the preferential treatment and the implementation of the trade policy reforms.

Keywords: agricultural trade patterns, duty-free market access, gravity model, preferential tariff

Published: March 31, 2014  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
LEE SY, LIM SS. Determinants of the Korean agricultural trade with the LDCs and the OECD countries. Agric. Econ. - Czech. 2014;60(3):110-122. doi: 10.17221/118/2013-AGRICECON.
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Amurgo-Pacheco A., Pierola M. (2008): Patterns of Export Diversification in Developing Countries: Intensive and Extensive Margins. Policy Research Working Paper No. 4473, World Bank. Go to original source...
    2. Bouët A., Mishra S., Roy D. (2008): Does Africa Trade Less than It Should, and If So, Why? The Role of Market Access and Domestic Factors. International Food Policy Research Discussion Paper No. 770, International Food Policy Research Institute, Washington D.C.
    3. Center for Policy Dialogue (CPD) (2006): The Hong Kong Ministerial Declaration: An Assessment from LDC Perspective. Report No. 83. Available at http://www.cpd.org.bd/pub_attach/DR-83.pdf.
    4. Cheng I.H., Wall H.J. (2005): Controlling for heteroskedasticity in gravity models of trade and integration. Federal Banks of St. Louis Review, 87: 49-63. Go to original source...
    5. Cheong J.H., Lee M.H. (2005): A Study on the Preferential Trade System and its Economic Effect. Research Report 05-06, Korea Institute of Public Finance.
    6. Cho M.J., Kim M.S. (2010): The Study on Korea's Preferential Scheme for LDCs. Trade and Investment, Study Series 10-2, Korea Institute for International Economic Policy (in Korean).
    7. Cho M.J., Kim Y.K., Park J.H., Kang J.H. (2011): Strategic Approaches for the Introduction of the GSP Scheme into Korea. Research Paper 11-11, Korea Institute for International Economic Policy.
    8. Cipollina M., Salvatici L. (2010): The trade impact of European Union agricultural preferences. Journal of Economic Policy Reform, 13: 87-106. Go to original source...
    9. De Benedictis L., Salvatici L. (eds.) (2011): The Trade Impact of European Union Preferential Polices: An Analysis Through Gravity Models. Springer, Heidelberg. Go to original source...
    10. De Benedictis L., Vicarelli C. (2005): Trade potentials in gravity panel data models. The B.E. Journal of Economic Analysis & Policy, 5: 1-31. Go to original source...
    11. Edo M. (2011): Reciprocal Liberalization: Bilateral, Plurilateral or Multilateral? Studies in Trade and Investment, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    12. Egger P. (2000): A note on the proper econometric specification of the gravity equation. Economics Letters, 66: 25-31. Go to original source...
    13. Egger P., Pfaffermayr M. (2003): The proper panel econometric specification of the gravity equation: A threeway model with bilaterial interaction effects. Empirical Economics, 28: 571-580. Go to original source...
    14. Estrella G.H. (2012): Comparing Alternative Methods to Estimate Gravity Models of Bilateral Trade. Department of Economic Theory, University of Granada, Granada.
    15. Evenett S. (2008): The European Union's Generalized System of Preferences: An Assessment of the Evidential Base. Available at http://acp-eu-trade.org/library/library_detail.php?library_detail_id=4509&doc_language=Both.
    16. Feenstra R.C. (2002): The gravity equation in international economics: Theory and evidence. Scottish Journal of Political Economy, 49: 489-490. Go to original source...
    17. Gauto V. (2012): Paraguay and Mercosur: A Sensitivity Analysis of Gravity Model Estimation Techniques. Department of Applied Economics, University of Minnesota, Falcon Heights.
    18. Glick R., Rose A. (2002): Does a currency union affect trade? The time-series evidence. European Economic Review, 46: 1125-1151. Go to original source...
    19. Gujarati D.N. (2003): Basic Econometrics. 4th ed. McGrawHill, New York.
    20. Heckman J. (1979): Sample selection bias as a specification error. Econometrica, 47: 153-161. Go to original source...
    21. Helpman E., Melitz M., Rubinstein Y. (2008): Estimating trade flows: trading partners and trading volumes. The Quarterly Journal of Economics, 123: 441-487. Go to original source...
    22. Kim H.H. (2009): Analysis on the Trade Flows of Fruit Products in Korea Using Gravity Model. Korea Rural Economic Institute, 32-3: 47-70.
    23. Koning N., Pinstrup-Anderson P. (eds.) (2007): Agricultural Trade Liberalization and the Least Developed Countries. Wageningen UR Frontis Series, Vol. 19. Springer, Dordrecht, The Netherlands. Go to original source...
    24. Linders G.-J., de Groot H.L.F. (2006): Es timation of the Gravity Equation in the Presence of Zero Flows. Discussion Paper No. 06-072/3. Tinbergen Institute, Amsterdam. Available at http://search.ebscohost.com/login.aspx?direct=true&db=ecn&AN=0908652&site=ehost-live, http://www.tinbergen.nl/discussionpapers/06072.pdf
    25. Lissovolik B., Lissovolik Y. (2006): Russia and the WTO: The gravity of outsider status. IMF Staff Papers, 53: 1-27. Go to original source...
    26. Martínez-Zarzoso I., Nowak-Lehmann F. (2003): Augmented gravity model: An empirical application to Mercosur-European Union trade flows. Journal of Applied Economics, 6: 291-316. Go to original source...
    27. Ministry of Strategy and Finance (MOSF) (2012): Presidential Decree on Preferential Tariff for Least-Developed Countries. Republic of Korea (in Korean).
    28. Puhani P. (2000): The Heckman correction for sample selection and its critique. Journal of Economic Surveys, 14: 53-68. Go to original source...
    29. Rahman M. (2009): The Determinants of Bangladesh's Imports: A Gravity Model Analysis under Panel Data. In: Australian Conference of Economists 2009. Available at http://dx.doi.org/10.2139/ssrn.1485201
    30. Raimondi V., Olper A. (2011): Trade elasticity, gravity and trade liberalization: Evidence from the food industry. Journal of Agricultural Economics, 62: 525-550. Go to original source...
    31. Rauch J.E. (1999): Networks versus markets in international trade. Journal of International Economics, 48: 7-35. Go to original source...
    32. Sevela M. (2002): Gravity-type model of Czech agricultural export. Agricultural Economics - Czech, 48: 463-466. Go to original source...
    33. Shepherd B. (2008): ARTNeT Capacity Building Workshop for Trade Research: "Behind the Border" Gravity Modeling. Niehaus Center, Princeton University GEM, Sciences Po, Princeton.
    34. Shepotylo O. (2009): Gravity with Zeros: Estimating Trade Potentials of CIS Countries. Discussion Paper No. 16. Kyiv School of Economics, Kyiv. Go to original source...
    35. Tinbergen J. (1962): Shaping the World Economy. Twentieth Century Fund, New York.
    36. UNCTAD (2011): The Least Developed Countries Report 2011: The Potential Role of South-South Cooperation for Inclusive and Sustainable Development. UN, New York
    37. UNCTAD (2012): The Least Developed Countries Report 2012: Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities. UN, New York.
    38. UNDP (2011): Towards Human Resilience: Sustaining MDG Progress in an Age of Economic Uncertainty. Available at http://www.undp.org/poverty
    39. United Nations ESCAP (2007): Challenges of the Least Developed Countries: Governance and Trade. LDCs, No. 8, New York.
    40. Vollrath T.L., Hallahan C.B. (2009): Economic Costs and Payoffs of Bilateral/Regional Trade Agreements. In: 2009 Annual Meeting, Agricultural and Applied Economics Association. Milwaukee, July 26-28, 2009.
    41. Yu M. (2010): Trade, democracy, and the gravity equation. Journal of Development Economics, 91: 289-300. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International (CC BY NC 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content