Quantitative Regional Economic and Environmental Analysis for Sustainability in Korea

Sustainable development at a global and local scale heavily depends upon the pathways taken by cities in the near future. Within scientific research, this frequently identified “urban challenge” has been recognized and addressed increasingly in urban studies, as well as in transformation studies. However, while both fields clearly overlap and effectively complement each other in this regard, the respective epistemic communities have largely remained separate so far. Therefore, this paper elaborates on the core concepts and approaches that dominate the emerging scientific debate on the role of cities in sustainability transitions. Based on a methodic literature review, it delineates the progressive convergence of the diverse disciplines involved over four major research perspectives. It equally derives key conclusions for future research and policy, highlighting the urgent need to connect the four fields identified, to link socio-technical and social-ecological system (SES) perspectives, to conceive of holistic innovations for developing new planning approaches, and to fully embrace transdisciplinarity by practicing science in society.

This chapter examines changes in the spatial patterns of human capital segregation across neighborhoods in the Seoul metropolitan area during 2000–2010 and investigates the following three questions: (1) to what extent are highly educated individuals segregated from less-educated individuals across neighborhoods, (2) to what extent do highly educated and less-educated individuals live in isolated neighborhoods with individuals of similar educational status, and (3) to what extent can spatial clusters of highly educated or less-educated individuals be isolated across neighborhoods? Four major findings were obtained. First, the number and proportion of people with at least a college education increased markedly over time. Second, according to results of the dissimilarity index and the generalized dissimilarity index, the degree of segregation is highest for the group with more than a college education vis-à-vis the group with less than a high school education. Additionally, it is lowest for the group of high school graduates vis-à-vis the group with less than high school education in the Seoul metropolitan area over time. Third, the information theory index shows that the degree of diversity and human capital segregation steadily increased over time. Fourth, highly educated individuals tend to be clustered in the southern parts of the Seoul metropolitan area. By contrast, less-educated individuals were more likely to be concentrated in the mid-northern parts of the metropolitan area. The results of the empirical analysis in our study have implications for regional policies and can inform future research on the social processes and mechanisms of polarized educational segregation.

This paper examines skill mismatch problems in regional labor markets due to discouraged worker effects in South Korea. In Seoul metropolitan areas (SMAs), supply surplus for highly educated workforce among the youth is evident and causes serious distortion not only in SMA but also in national labor market. On the contrary, the shortage of low-skilled workers in Korea due to overinvestment in human capital forces out establishments to other countries with cheaper labor costs. Proposed regression models in this study specify how the share of discouraged workers in a regional labor market can be determined by various factors such as demographic structures, labor market conditions, and migration pattern with regional and/or temporal fixed effects. The regional-temporal fixed effect model found to be the most important factor in explaining how these factors determine the relative stock of discouraged workers in a region. Among the variables describing regional labor market conditions, only two, labor force participation rate of young cohort (aged between 15 and 29) and that of highly educated population (college graduate or higher), directly influenced regional labor market distortion by determining the regional stock of discouraged workers. With more active participation of these groups in a labor market, the overall discouraged worker effect in a region reduces, leading to enhanced labor market efficiency. Migration pattern does not play any role on regional discouraged workers. This indicates the limited role of interregional migration on factor price equalization among regional labor markets in Korea.

Innovation is one of the most important driving forces of ICT industries, the leading industry of the Korean economy, and agglomeration economies are known to have positive impacts on innovation. The evolutionary agglomeration theory, however, suggests that the effects of agglomeration economies may vary depending on the life cycle of an industry. This study investigates how agglomeration economies have affected the innovation of the ICT manufacturing sector over its life cycle in the Seoul Capital Area (SCA), South Korea. A panel data set for patent applications during the period 2001–2013, which falls into the birth stage (2001–2003), the growth I (2003–2006) and II (2006–2009) stages, and the maturity stage (2009–2013), is used to model innovation in terms of various types of agglomeration economies. The results show that the types of agglomeration economies that have significant impacts on innovation vary over the life cycle of the industry: while local industrialization has a positive impact only in the birth stage, diversity has positive impacts in all the stages except the growth II stage. While large firms’ leading has a positive impact only in the growth II stage, competition among small firms has a positive impact only in the birth stage. This implies that different strategies for agglomeration are needed over the life cycle in order to sustain innovation in ICT manufacturing.

This study tries to answer whether agglomeration economies lead to better firm performance or not. By adopting the random-intercept-multilevel model for 2012 Korean manufacturing data, we suggest an econometric specification strategy of the constant returns to scale (CRS) Cobb-Douglas production function in the multilevel structure, estimate the specified model, and analyze the results. Adopting two types of agglomeration economies represented by specialization and diversification, the results discussed in this paper can be summarized into three policy implications. First, specialization and diversification show the opposite effects on firm performances in most regions except the regions in some large metropolitan areas. In an ideal situation, both effects are not a trade-off phenomenon, and highly agglomerated cities are expected to have synergies from both effects. In the 2012 manufacturing sector in Korea, however, the offset between the two factors is observed. This means before the central and local governments implement industrial policy, they need to consider the existing mix of manufacturing sectors to not lose one of the agglomeration economies. Second, the specialization effect is relatively weaker than the diversification effect across regions. Even though there is no rule of proper effect size on both factors, these weak specialization effects can be seen as a big threat to the current economic growth strategies in Korea. If this specialization fails at a region level due to the weak specialization economies, the policy goal may not be achieved. Last, spatial heterogeneity in intercepts of the regional level dominates both specialization and diversification effects. In addition, diversification follows the trend of spatial heterogeneity. In 2012, the production performance of manufacturing firms leaned heavily on the region-specific factors not explained by the two agglomeration variables. Considering the fact that there have been many policy concerns to resolve regional imbalance in economic growth, this questions the effectiveness of the previous efforts. From this standpoint, the strong spatial heterogeneity and the following trend of diversification emphasize that the local or central government, which tries to boost the economy in a lagging region and to achieve a well-balanced regional economy in a county, may want to think about the human capital or the other factors to increase productivity rather than just industry allocation strategy.

This study explores the impacts of the monetary and fiscal policies of local governments on the output growth of firms, using multilevel statistical models. It concludes that short-term loans and bonds have a positive influence on output growth but long-term loans have a negative effect, while the effect of paid-in-capital increases is inconclusive and insignificant. A credit guarantee from the local government has the largest impact on the elasticity values of factor inputs and financing amounts with respect to output, compared to other government expenditure programs.

Despite similar natural hazard magnitudes, the economic losses and fatalities due to natural disasters are usually unevenly distributed among nations, regions, communities, and individuals. Socially, economically, and environmentally vulnerable communities are more likely to suffer disproportionately from disasters. Identifying vulnerability factors to disasters is critical information for disaster managers and planners to make disaster-related policy and strategies for mitigating the negative impacts of disasters. This study constructs an index of disaster vulnerability of local communities in Korea. Twelve indicators including social, economic, and natural environment and built environment aspects are selected to assess 230 local communities’ vulnerability to disasters. Economic losses from disasters from 2001 to 2010 in Korea are analyzed using GIS. Moreover, this study examines the relationships between the constructed vulnerability indicators and economic damage from natural disasters. Machine learning techniques including Cubist and Random Forest are applied to examine what vulnerability indicators are statistically associated with disaster damage in Korea.

The purpose of this paper is to assess the spatial and economic impact of the malfunction of nuclear power plants in Korea using a spatial computable general equilibrium (SCGE) model with a microsimulation module of the railroad and highway networks. This integrated approach takes into account the flows of commodities and input of factors among regions and industries using the spatial interaction and accessibility. The economic agents of the model consist of the producers, households, and governments from 16 Korean city-province regions, each having seven industrial sectors. While the microsimulation module of the highway and railroad networks measures the change in the regional accessibility of highways and railroads after the disaster, the SCGE model estimates the spatial effect of the reduction in growth potential and regional accessibility levels caused by the disaster on the economies. These counterfactual experiments show that accidents at nuclear power plants could lead to a reduction of GDP by 3.87 %, and the negative effects on the gross regional product (GRP) tend to become more severe in the Busan MA than any other regions by 3.03 %. The GRP levels in Seoul could decrease by 2.96 %, which is the smallest recorded amount from the six areas, due to its fewer economic interactions with the rest of Korea and a kind of reflexive benefit.

This study suggests a framework quantifying a cyberattack on the Korean airport security system. Recent cyberattacks on nuclear power plants in South Korea and a serious cyberattack on Sony Pictures in the USA indicate possible invasion to an airport electronic system because the invasion would not have any border or entry point. Korea governments must consider this complex process that may cause turmoil once occurred. This complicated situation highlights the need for improved intergovernmental collaboration within the Korean territory. First, to avoid cyberterrorist threats, it is essential to coordinate intergovernmental network closely. Designing this network should consider delivering both a competitive game between attackers and defenders and a cooperative game between governments. Second, because an airport shutdown that is only located in a certain area would cause ripple impacts throughout other domestic (and international) economies, the Korean interregional input–output model should be combined to capture this type of ripple impacts. A new framework suggested as the Korean game-theoretic interregional economic model contributes to understanding strategies in cyberterror security and identifying the probabilistic economic costs on a South Korean airport closure by place of event and by type of industry. Using the identified equilibrium strategies for the Korean airport protection, a general guideline to evaluate resource allocation can be passed onto the South Korean government agencies.

This study evaluates transportation energy efficiency with respect to various forms of urban structures. Empirical models are developed by using the population and employment of the cities in Korea. Spatial structure is measured by the degree of concentration and the clustering index and uses relative and weighted indices. A two-stage least squares model is developed because spatial structure primarily affects changes in travel distance, which consequently affect traffic volume and transportation energy consumption. Empirical results vary with city size. Small cities with deconcentrated and clustered areas are transportation energy efficient and effective in promoting clustering within a specific region and enhancing accessibility for employment and service. On the other hand, promoting concentration and declustering patterns are a more effective strategy to decentralize population, mitigate agglomeration diseconomies, and ultimately reduce transportation energy consumption in large cities. Therefore, population and employment level within a spatial distribution should be understood to adopt an optimal spatial strategy for influencing travel behavior and energy consumption.

In this chapter, I briefly introduce my previous research on the carbon co-benefits of pollution abatement in China and then discuss what key lessons Korea can learn from it. A main finding is that strong cross effects exist between air pollution and carbon mitigation in China. In particular, China could even overachieve its official CO₂ intensity targets, in terms of carbon reductions, by simply meeting the existing SO₂ and NO_x reduction goals. Accordingly, the CO₂ intensity targets are not binding and generate unnecessary compliance costs. This result conveys several policy implications for Korea. First, local pollution abatement, given its strong cross effects, may be considered as a carbon mitigation strategy. However, taking full advantage of the cross effects—meeting emission reduction targets at minimal costs—requires a close coordination between air pollution and carbon regulations. Finally, clear and consistent long-term reduction goals and associated policy incentives are necessary to promote economy-wide, forward-looking technology adoption and thus to avoid the potential lock-in effect in energy supply.

This study analyzes the effects of the project investments on the river water quality improvement and also provides contingent valuation estimates of household’s willingness to pay (WTP) to continue public investment to the river water quality improvement and maintenance. The estimation results using the OLS regression models with correction of autocorrelation show that the household soil pipe connection project with investment of 26.7 billion KRW has reduced 1.68 ppm in BOD and that the project dredging sediments at the river bottom with investment of 16 billion KRW has resulted in the decrease of 1.12 ppm in BOD at the downstream of the River Taehwa. Using a contingent valuation method with multiple choices in consideration of respondent’s uncertainty, the estimation results of four logit models show that truncated mean household’s WTP is estimated from 1224.7 KRW to 2747 KRW for the respective four models. The present values of total social benefits in the Ulsan Metropolitan City are estimated from 196 billion KRW to 441 billion KRW for the respective four models, when applying the 3 % discount rate.

A significant amount of embodied greenhouse gas (GHG) emissions have been and are currently being traded in the globalized economy. The conventional territorial approach to the control of GHGs released within a country fails to account for a large portion of GHGs for which a country may take responsibility, particularly from the perspective of consumption. Given the large volume of products traded among nations, a series of studies have underscored the need for the global monitoring of GHG emissions not only generated from production but also driven by consumptive activities. This study develops time-series GHG emission inventories from 1995 to 2009 from both production- and consumption-based perspectives in the case of South Korea and analyzes the factors that influence the increase and the decrease of GHG emissions. This empirical analysis has determined that production-based activities are more responsible for GHG emissions in South Korea than consumption-based activities. The analysis also found that the trade surplus of embodied GHG emissions in South Korea ranged from 0.31 to 1.01 tons per capita. A decomposition analysis showed that developments in environmental technology play a significant role in the reduction of GHG emissions, associated with a 45 % gross change in GHG emissions. However, this reduction was offset by increases in demand and changes in the input structure to energy-intensive sectors. The change of input structure is a critical factor contributing to trend in increasing embodied GHG emissions in not only South Korea but also nations linked with global trade.