A Comparison of the International Division of Labor between Korea and Developed Countries

The Korean economy has continued to grow through an export-led growth strategy since the 1960s. As a result, the dependency of Korea’s economy on trade is exceptionally high. The high trade dependency is criticized by some people because it tends to make Korea’s economy vulnerable to overseas economic fluctuations. To adequately address the trade depdency issue, it should first be clarified why Korea’s trade dependency is so high.It is also well-known that overall Korean exports have heavily depended on the manufacturing rather than the service industry. It may be agreed on that the comparative advantage of manufacturing has been based on price competitiveness rather than technological competitiveness, which may be vulnerable to the export expansion of developing countries such as China. Also in this respect, there should be scrutiny as to what is true or not.The Korean economy must continue upgrading and advancing its industrial structure to enhance its productivity and competitiveness by means of balanced growth between export and domestic demand on one hand and between manufacturing and service on the other hand, in addition to a higher value-added of exports. In an open economy, a country’ industrial structure or resource allocation between industries tends to be determined by its international division of labor or specialization structure. Therefore, an upgrading of industrial structure in a country reflects an upgrading of its international division of labor and vice versa. This study aims at clarifying how far Korea’s international division of labor has advanced and what the policy implications are for its upgrading, by means of comparison with the international division of labor of developed countries