Abstract

By utilizing a unique annual series data of the Korean economy from 1986 to 2004, this paper discovers that differences between two indicators of openness (i.e., trade and finance) are causal to the differentials in real per capita income growth rate. The empirical evidence is consistent with the hypothesis that, with other factors given, greater openness to finance and trade makes a substantial contribution to higher real per capita income growth rate. Therefore, in order to increase real per capita income growth rate, Korean economic policies must pursue greater openness to trade and finance as well as regulatory reform.