Design of Reshoring Impact Index based on Input-Output Analysis for Korean Reshoring Policy

Taehyung Kim, Minsoo Kim

Abstract


Reshoring refers to the activity of relocating overseas expanded companies back to their home countries, and is one of the key strategies to protect domestic industries and revitalize the national economy. Korea has been pursuing reshoring promotion policies since 2012, but the number of U-turn companies is still paltry compared to those of major advanced countries. The relocation of production bases in key industrial fields is an important issue to be dealt with not only at the corporate level but also at the national level. For the success of reshoring promotion policies, it is necessary to quantitatively measure whether reshoring is actually taking place. Since existing indicators for assessing the reshoring effect are based on the dependence of the US manufacturing industry upon offshore production, it is difficult to apply these indicators to Korean industry as they are. It also shows some limitations in explaining the reshoring impact across all industries, including manufacturing. In this study, two reshoring impact indices were designed to more comprehensively understand the impact of reshoring by combining the proportion of imported intermediate inputs in the inter-industry relation table(a.k.a. input-output table) with the value-added inducement coefficient. The two impact indices showed a generally similar trend for the US and Korea, but showed a different trend from the existing reshoring indices. This can be interpreted as the result of the value-added inducement coefficient, which adjusts the proportion of imported intermediate inputs according to the impact on the national economy by industry. Based on this study results, if the reshoring trend of the domestic industry is identified and the reshoring effect of each industry is analyzed in depth, it is expected that the promotion policy will be effectively implemented through narrowing its focus.


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