The demand for imports in Korea: a production analysis approach

Abstract

Balance of trade problems in the United States and other highly industrialized countries have resulted in cries for Korea to liberalize its import policies. This paper uses a translog cost function to investigate Korea's demand for imports and the effects of trade liberalization on the demand for the country's domestic inputs. This study suggest that the domestic inputs and imports are substitutes and that as the proportion of investment goods in Korea's GDP increases, the demand for imports will also increase. Thus further liberalization of Korea's import policies could present short-run problems in the domestic input markets.