Governments have established export promotion agencies (EPAs) in an effort to boost exports. Despite criticism regarding the effectiveness of EPAs, the policy has not been abandoned and there has been an increasing recognition of the benefits on the basis of economic justification, including market failures. Such policies must be based strictly on evidence. Are EPAs truly crucial for export success? Some have argued that export success in Korea has been due largely to government policies targeted at the promotion of exports. This paper demonstrates that the network of EPA offices abroad has been a critical factor in the success of Korea's exports. An increase of 10% in the budget of EPA's overseas offices has been shown to increase exports by 2.45%–6.34%. The findings of this paper present a clear rationale for government intervention. (JEL F10, F14)
Empirical studies that pool data from developed and developing countries may conflate the separate roles played. The pooled coefficient estimates may significantly misrepresent the true relationships. This paper analyses the impact of outward and inward foreign direct investment (FDI) flows between Korea and developed and developing countries on Korean exports in 12 manufacturing sectors over the 1988-2006 period. The evidence suggests that the outward FDI to developing countries is likely to increase Korean exports to those countries than FDI to developed countries likely to increase exports to developed countries. Thus, pooling investment flows can lead to incorrect inferences.
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