Spatial Panel Analysis of Ambient Air Pollution in Korea

Hyungsun Yim (University of Illinois at Urbana-Champaign) and Byeongseon Seo (Korea University)

발행년도 2024 / Vol 40 / No 2

This study investigates the underlying drivers behind air quality pollution in Korea by using spatial panel analysis. Specifically, we consider the local and transboundary effects of economic, climatic, and geographical factors leading to the heightened presence of fine particulate matter (PM2.5). Furthermore, our study expands its scope beyond national boundaries to include an evaluation of external sources that contribute to elevated pollution levels within Korea. Consequently, this research adopts a multilevel approach to assess the within and outer factors of air pollution in Korea. Our analysis is based on a spatial panel dataset spanning all districts of Korea by incorporating satellite-based air pollution, meteorological, and geographic information for 2010–2016. Empirical results indicate that air pollution degrades the air quality in other cities and the overall national ambient pollution as well. Moreover, empirical results from the general nesting spatial (GNS) specification of spatial interaction suggest that the impacts of economic and climatic factors on air pollution are substantial. In addition, our analysis incorporates cross-country spatial effects of air pollution, which reveals a significant transboundary spillover effect. Furthermore, a deeper analysis of spatial heterogeneity underscores intriguing disparities in the impact estimates. Changes in domestic and foreign factors in the northwest region are linked to a more pronounced diffusion of pollution to multiple cities in contrast to the impacts originating from the southeast. 

How Much Do Prices Respond to Demand and Supply Shocks?

Seong-Hoon Kim (Yonsei University -- Mirae) and Seongman Moon (Jeonbuk National University)

발행년도 2024 / Vol 40 / No 2

This paper presents a theoretical examination of price responses to movements in demand and supply where firms face either unwanted inventories or stockouts in each period. The response mechanism consists of two complementary motives that arise when operating under uncertain business environments. To an increase in demand, a firm has a motive to lower its price reflecting lower effective marginal costs but also has another motive to raise its price to rebalance expected marginal revenues associated with two distinct demand states, unwanted inventories and stockouts. These two motives cancel out each other at optimum, resulting in a limited response of prices to demand shocks. To a cost-push shock, the firm has a motive to raise its price reflecting higher effective marginal costs for a given output level and is further prompted to raise prices reflecting a higher expected value of unit inventory. The two motives push prices up in the same direction, resulting in a large response of prices to supply shocks.