Comments by Sung Chun Jung, on Gains from Trade Liberalization between Heterogeneous Countries: Implications for the Korea–Japan FTA

Sung Chun Jung: In this paper, the authors study the economic implications of the Korea–Japan free trade agreement (FTA) based on an economic model in which search and matching frictions in the labor market are assumed and other markets such as consumption goods and capital markets are assumed to be competitive. Each country produces one consumption good by using labor and capital and sells it in domestic and foreign markets. Each country has its own production function, which could be more capital-intensive relative to the other country. Of course, it imports foreign products to consume from the foreign country. Only the labor market is not perfect. There are some frictions in the labor market that make unemployment endogenous. The authors raise a question: What are the economic impacts of bilateral trade liberalization between the two countries under these conditions? And what can be said about the effects of the Korea–Japan...