Assistant Professor
LKY School of Public Policy,
NUS

Research

Working Paper

“When Export Controls Backfire: Evidence from 2019 Korea-Japan Trade Dispute” [PDF]

I show that export controls can "backfire," increasing productivity and exports in the target country. This productivity response mitigates the negative welfare impact in the target country and exacerbates it in the imposing country. I leverage Korea's response to the 2019 Korea-Japan Trade Dispute. In 2019, Japan announced export controls on South Korea for national strategic items, leaving enforcement to the discretion of Japanese officials. Although no export restrictions were imposed in practice, the threat alone triggered substantial changes in Korea's imports and exports. Imports from Japan declined substantially, irrespective of whether items were directly targeted by the announcement. However, imports from Japan decreased disproportionately in sectors where Japan had been the leading supplier to Korea. Surprisingly, Korea's exports in these same sectors expanded while their prices declined. Domestic production in these sectors also expanded broadly with capital deepening, pointing to scale economies. Motivated by these empirical findings, I structurally estimate the strength of scale economies. Finally, I quantify the welfare effects, showing that scale economies mitigate the loss in Korea and exacerbate the loss in Japan.

“Responding to Semiconductor Supply Chain Disruptions: Evidence from South Korea” [PDF]

Abstract

How might semiconductor producers respond to the possibility of restricted access to key imported intermediate goods? And how might this response vary across inputs? I use the response from Korean semiconductor producers amid the 2019 Korea-Japan political dispute to answer these questions. In July 2019, Japan announced potential export controls on South Korea for three key semiconductor inputs, leaving implementation to Japanese officials. Although no export restrictions were applied in practice, the announcement itself triggered uncertainty over the global supply chain, leading to drastically different responses from Korean producers across the three targeted inputs. I present a model featuring two adjustment margins—inventories and global sourcing decisions—with heterogeneity across inputs in the initial share of sourcing from Japan. I show that the calibrated model matches the heterogeneous patterns across the three inputs, suggesting that these two adjustment margins played an important role in practice. Using the model, I also solve for how Korean producers would have responded had Japan extended its export controls to other key semiconductor inputs. These counterfactual responses align with actual responses, indicating that semiconductor producers feared an extension of Japanese export controls.

Work in Progress

“Hysteresis Effects of Geopolitical Conflicts on Consumer Goods Trade”