The Political Economy of Market-Opening Pressure and Response: Theory and Evidence for the Case of Korea and the U.S.

This paper develops a model of market-opening pressure and response based on the positive theory of political economy and applies it to the case of Korea and the U.S. The model formulates a demand function for market-opening based on foreign pressures for the opening and a supply function based on the interaction of domestic forces for and against the opening. An empirical analysis is performed by estimating logit functions separately for demand, supply and reduced form equations. The behavioral patterns of Korea's supply of as' well as U.S. demand for market-opening turn out to be broadly consistent with the theory of common interest groups. It is also found that both patterns exhibit an aspect of an enlightened government to some extent. Finally, it is shown that supplier tends to respond to opening pressures in a negative manner, deviating from the independent enlightened supply behavior.