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Abstract | PDF (648 kilobytes)

This paper reviews the basics of regression discontinuity (RD) design,
whose hallmark is having a treatment determined by an underlying score
(i.e., ‘running variable’) crossing a known cutoff or not. Following the basics,
recent advances in RD are examined, where the topics are grouped into those
related to score and those not. The former topics include multiple scores, measurement
errors in score, integer score, and score-density continuity. The latter
topics include regression kink (RK), high-order effects, and extending RD identification
range (i.e., external validity). Detailed empirical examples are provided
for the RD topics, but not for the RD basics which are fairly well-known
these days. RD is simple, which can thus appeal even to lay audiences, and this
review accordingly emphasizes the intuitive nature of RD and its applicability
in practice. Practical and widely applicable techniques are given more coverage,
whereas theoretically-motivated but less-practically-relevant ones are only
briefly mentioned. The beauty of RD is in its simplicity, and temptation to make
it too sophisticated should be resisted.

Abstract | PDF (163 kilobytes)

Our main objective in this paper is to show that income taxation creates an extra burden or distortion when tax avoidance is available. We present a labor supply model with endogenous asset portfolio choice and show that tax avoidance by trading assets impacts labor supply response and total excess burden of income tax. In our model individuals are allowed to change their asset portfolio to reduce their tax liabilities, and this distortion is the main source of the higher efficiency cost in our model. Furthermore, we show that ignoring the avoidance responses leads to biased results when estimating the labor supply distortion and welfare cost of a tax reform. Progressivity of a given tax system is predicted to be less than the formal tax code due to tax avoidance through tax arbitrage.

Abstract | PDF (112 kilobytes)

We propose a canonical form of the CES production function. It includes the normalized CES function as a special case. It can represent factor-augmenting technological progresses through the factor efficiency term. In general, it can represent a family of CES-type function indexed by a parameter. The parameter may represent time, nations, regions, or industries. Finally, it treats well the concern on dimensional homogeneity.

Abstract | PDF (4024 kilobytes)

The Korean economy experienced a slowdown in both productivity growth and exports in the 2010s. Here we analyze the relationship between changes in exports and in the growth of total factor productivity (TFP). Our empirical analysis of data from the Mine and Manufacturing Survey (2000 ∼ 2017) shows that there is a positive relationship between exports and productivity. We find that the positive relationship was stronger during periods in which exports decreased. We find that while the decrease in exports may have slowed or reduced the growth in productivity, the increase in exports did not necessarily increase productivity since 2000. We focus on the irreversibility of inputs as a possible explanation of the asymmetric relationship between exports and productivity growth. Our results show that in the input-inelastic sectors in which inputs are not flexibly adjusted, productivity declined further as export growth decreased.