Abstract
We examine recent trends of South Korea’s outward foreign direct investment from 2001 to 2021, which shows substantial change in terms of the total amount and compositions. Using gravity models, we test whether these differential time trends across the industries and destination countries survive after incorporating economic factors. Controlling for economic conditions, we find that the FDI to China has been declining much earlier than the China–South Korea political dispute, while the FDI to USA shows a steady increase, making it the top FDI destination throughout the sample period. Investment in tax haven shows rapid increase across all sizes of South Korean investors and therefore, further research is needed on its implications for tax evasion.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Among the existing studies, the papers on outward FDI originating from Asian countries include Bano and Tabbada (Citation2015), Petri (Citation2012), and Rajan (Citation2008).
2 As of 2020, KOTRA operates in 84 countries, with 10 regional headquarters.
3 Available at https://comtradeplus.un.org/
5 Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, Bermuda, the Cayman Islands, Grenada, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent & Grenadines, Turks and Caicos
6 The unit of observations in our data is not an economic agent (e.g. individuals or firms), but a cell defined by year, investor size, destination country and investing industry. Thus, one cell may contain a drastically different number of economic agents compared to another cell. As we do not have the relevant information to compare different cells, we use each cell’s outward FDI as a weight because it is the contribution of that cell to the total FDI of South Korea.
7 Consisting of 10 countries. Mean value of USD 73.10 million dollars.
Additional information
Funding
Notes on contributors
Kyung Hyun Kim
Kyung Hyun Kim graduated from the Graduate School of International Studies at Seoul National University and is currently working at BASF Korea.
Soohyung Lee
Soohyung Lee is a Professor in the Graduate School of International Studies at Seoul National University (SNU). She received her Ph.D. from Stanford University and her BA from Seoul National University. Her fields of research lie at the intersection of Econometrics, Labor, Public, Development, and Market Design.