Analyzing two states economic public presentation during the period is fascinating but confounding manner to acquire to cognize about universe ‘s economic systems. There is a batch of different facets which contributes to economic development of each state, in this instance Italy`s and South Korea`s economic systems. However, merely looking through these facets you can measure both states economic places in the universe.
In this paper ‘s first chapter we will mentality economic public presentation during the last 20 twelvemonth period harmonizing to the GDP. And see why one or another country`s GDP was higher or lower in one or another period. Second chapter analyzes economic freedom and shows in which state is more freedom of concern, employment, authorities disbursement etc. Chapter three replies question in which state is easier to make and get down a concern. Fourth chapter Tells why it is good to put in Italy or Republic of Korea. And concluding chapter discuss the function of civilization in economic development and what impact has trust and faith for economic end products.
1.1.GDP growing 1990- 2010
There are different ways to measure economic public presentation of states during the period, nevertheless, the best manner is to relay on GDP addition or lessening during this period. The public presentation of GDP growing is the most important factor finding the states economic growing. Growth is measured as the alteration in the GDP of a state over a twelvemonth, after deducting an sum due to the degree of rising prices to bring forth a figure for existent growing. The comparative economic growing of a state when compared with challengers is a valuable index of lifting chances for domestic concern and investings ( OECD, 2010 ). The chief inquiries to be answered in this chapter are: how is the GDP growing different between the states of pick and why do both states have a important bead in GDP from twelvemonth 2008?
Graph1: GDP growing for Italy and South Korea ( 1990- 2010 ). Beginning: World Bank ( WDI )
As it is noticeable at the graph that Italy`s economic public presentation is much better than South Korea`s. Whereas Italy is one of the members of G8. Even in the beginning of period ( 1990 ) the GDP of Italy was three times greater than South Korea ‘s. Particularly, Italy`s economic system started growing highly fast from the twelvemonth 2002 boulder clay 2008. The GDP grew about two times from 1.200 billion US $ to about 2.400 billion US $ in 2008. However, after making the extremum in 2008 Italy`s economic system decreased sing to GDP which one-year growing was -5.0 % ( World Bank, 2010 ).
The crisp psychiatrist of GDP in South Korea in 1998 when GDP decreased about twice sing to the old twelvemonth was Asiatic fiscal crisis which erupted Asia`s economic system in mid 1997s. The chief grounds of this crisis were trade limitations, capital controls, close links between the authorities, Bankss and corporations and eventually hapless administration ( IMF, 2010 ). Despite -7 % one-year growings in 1998 in 1999 the one-year growing of GDP was 9 % it was resulted by international fiscal support and alterations in Korea policies. It was necessary to liberalise the capital history, curtail the fiscal and corporate sectors, heighten labour market flexibleness, and better informations coverage ( IMF, 2010 ).
1.2. GDP one-year growing
Graph2: Annual GDP growing for South Korea and Italy ( 1990- 2010 ) Beginning: World Bank ( WDI )
The other facet, which affected both states GDP alterations, was recent universe fiscal crisis. Sing to the one-year growing chart it in obvious that the fiscal crisis largely affected Italy which one-year growing of GDP was -2 % in 2008 and -5 % in 2009 ( OECD, 2010 ). The chief facet which was affected by the low demand of luxury goods on which Italy`s economic system specializes on. However, Korea`s GDP growing was non as strongly affected as Italy`s. During this fiscal crisis GDP growing still positive and merely in 2009 there was no growing in GDP ( OECD, 2010 ).
The information provides information, that South Korea GDP grew much faster each twelvemonth, except twelvemonth 1998, than Italy`s. Merely from twelvemonth 2008 the Italian GDP bead significantly, while South Korea ‘s GDP merely stopped turning. Consequently, it means that all this period Republic of Korea was developing and transforming itself into an advanced industrial economic system ( IMF, 2010 ).
In decision, harmonizing to the graph 2 we can see that Italy ‘s GDP grew non so systematically as South Korea ‘s. Furthermore the OECD states during the old ages of 1990-2010 had mean one-year GDP growing of 3.01 %, nevertheless Italy ‘s economic system grew about 0.23 % and South Korea ‘s GDP grew 5.62 % ( OECD, 2010 ).
2.0. Economic freedom
Since holding a strong impact on markets, protection of private belongings right, authorities presence and labour, the economic freedom is closely related to economic growing. In general states with higher degree of economic freedom are more comfortable and have higher economic growing ( Heritage Foundation, 2008 ).
2.1. Overall Economic freedom of South Korea.
Graph 3: Economic freedom of South Korea ( 1995-2010 ) and World Average. Beginning: Heritage Foundation
Harmonizing to Heritage Foundation latest research South Korea ‘s economic freedom mark is 69.9 what means that its economic system is free, doing its economic system the 31st freest in the 2010 Index. Actually, we can see from the graph that concern freedom about stays stable in all period from 1995 boulder clay 2010 about 69 % what shows that during this period there were no force per unit area on the economic system. Actually, South Korea as the export-oriented economic system tonss above the universe norm in nine of the 10 economic freedoms in 2010. Bettering the efficiency of the revenue enhancement system and doing revenue enhancement rates more competitory, significant belongings rights and the well maintained regulation of jurisprudence helped for the Republic of Korea to accomplish that sort of mark ( Heritage Foundation, 2010 )
2.2. Overall Economic freedom of Italy
Graph 4: Economic freedom of Italy ( 1995-2010 ) and World Average. Beginning: Heritage Foundation
Italy ‘s economic freedom mark is 62.7. Its overall mark is 1.3 points higher than last twelvemonth, reflecting modest betterments in trade freedom and investing freedom. In add-on, Italy is ranked 35th out of 43 states in the Europe part, and its mark is somewhat above the universe norm. Actually, the regional differences in Italy ‘s economic development remain typical. The northern portion of the state has well-established traditions of private-sector entrepreneurship, while the southern portion of the state has long been dependent on the agricultural sector and authorities public assistance. In add-on, Italy ‘s overall economic freedom is affected by uneffective public finance direction, considerable corruptness, and a high revenue enhancement load ( Heritage Foundation 2010 ).
2.3. Business Freedom
Italy 77.9 vs. South Korea 91.9
Comparing concern freedom it is noticeable that South Korea is winning in this instance with a difference about 15 %. However, to get down a concern in Italy you need 10 yearss and in the Republic of Korea it requires about 14 yearss when universe ‘s norm is 35 yearss. In add-on you need to travel through 18 processs than in norm in the universe it requires pass 218 processs. Whereas, in South Korea it is exceptionally easy to shut concern than speaking about Italy it was non mentioned.
2.4. Trading freedom
Italy 87.5 vs. South Korea 70.8
Talking about merchandising it can be seen that this clip Italy is winner what means that trading is better with Italy than South Korea. Actually, Italy ‘s trading policy is the same as all European Union members. Looking at South Korea we see that some prohibitory duties, import and export limitations, services market entree barriers, import revenue enhancements, usage of “ accommodation ” duties and revenue enhancements, onerous and non-transparent criterions and ordinances, province trading, and subsidies add to the cost of trade.
2.5. Fiscal Freedom
Italy 55.2 vs. South Korea 71.1
Italy has a high income revenue enhancement and a moderate corporate revenue enhancement. The top income revenue enhancement rate is 43 per centum, and the top corporate revenue enhancement rate is 27.5 per centum when in South Korea the top income revenue enhancement rate is 38.5 per centum and the top corporate revenue enhancement rate has been reduced to 22 per centum. Furthermore, in the most recent twelvemonth, overall revenue enhancement gross as a per centum of GDP was 43.3 per centum in Italy and 28.7 per centum in Korea ( Heritage Foundation, 2010 )
2.6. Monetary Freedom
Italy 79.0 vs. South Korea 77.4
This clip both states result, are about equal. Inflation in both states was moderate about 3-4 %. Korean pecuniary policy has adjusted rapidly to germinating international inflationary and deflationary force per unit areas. The authorities can command monetary values on several merchandises by exigency edict; can crest monetary values on cardinal natural stuffs; and regulates or controls monetary values in certain sectors, including agribusiness, telecommunications, other public-service corporations, pharmaceuticals and medical services, and some energy merchandises. When in Italy points capable to monetary value controls at the national degree include imbibing H2O, electricity, gas, main road tolls, and prescription drugs reimbursed by the National Health Service, telecommunications, and domestic travel ( Heritage foundation, 2010 )
2.7. Investing freedom
Italy 75.0 vs. South Korea 70.0
Italy welcomes foreign investor and attempts to pull them but Foreigners may non purchase land along the boundary line than in South Korea foreign persons and corporations portion the same rights as Koreans in buying and utilizing land. Talking about the investing clime in South Korea it is progressively unfastened, but media, electric power, newspapers, fishing, power coevals, air hose conveyance, certain agricultural sectors, and a few other sectors remain restricted.
2.8. Fiscal Freedom
Italy 60.0 vs. 70.0
Italian fiscal sector is good developed and provides a broad scope of topics, but South Korea has modern fiscal sector with unfastened doors for positive reforms and motions ( Heritage Foundation, 2010 ). In Italy merely three cardinal fiscal establishments remain collectivist. However, Bankss are non free from political intervention. The five largest Bankss account for over 50 per centum of assets. Than Korea`s authorities has succeeded in recapitalizing Bankss and non-bank fiscal establishments. Weak establishments have been closed or merged, and non-performing loans have decreased well. Foreign Bankss own bulk bets in major commercial Bankss, though foreign ownership remains restricted.
2.9. Property rights
Italy 55.0 vs. South Korea 70.0
In Korea private belongings is unafraid and expropriation is improbable but the justness system sometimes can be inefficient and slow. Protection of belongings right needs to be improved. In Italy belongings rights are secure; nevertheless, justness system is remarkably slow and largely ends up at tribunals. Therefore, belongings rights in Italy falls below criterions of other developed Western European states.
2.10. Freedom from corruptness
Italy 48.0 vs. South Korea 56.0
In Italy and corruptness is perceived as nowadays. Italy ranks 48th out of 179 states in Transparency International ‘s Corruption Perceptions Index for 2008 than Korea is fortieth topographic point ( Heritage Foundation, 2010 ). In Italy largely investing related sectors are corrupt, nevertheless, it South Korea corruptness is forced by non-transparent regulation shapers.
2.11. Labor Freedom
Italy 58.2 vs. South Korea 47.1
In Italy labour ordinances are comparatively stiff and non-salary cost using a worker is inordinately high. Talking about the South Korea the labour ordinances are peculiarly rigorous, nevertheless, non-salary cost using a worker is moderate than you need besides to pay dismissing fees. In both states working hours are quit inflexible.
3.0. Entrepreneurship
The word entrepreneurship has a batch of different significances. It is the name given to the factor of production, which performs the maps of endeavor, a originative activity or an advanced map or/and a hazard taking factor which is responsible for an terminal consequence. Nonetheless, most significantly it is an ingredient to economic development ( Wikipedia, 2010 ). In this chapter we look at of import factors to successful entrepreneurship as relaxation of running a concern, the trading conditions of both states and revenue enhancement systems.
Graph 5: Easiness of concern universe rank ( 1-very easy, 183 – really hard ) Beginning: Doing Business
First, harmonizing to Doing Business study it is noticeable that in South Korea it is easier to make and get down a concern. In this state get downing a concern as it was mentioned in subdivision 2.3 to set up house takes merely 14 yearss and it requires 8 processs for a new enterpriser. However, in Italy merely 6 processs and 10 yearss are needed to make new endeavor; nevertheless, in Italy it costs more and requires minimum capital of 9.7 % of income per capita than in the Republic of Korea no get downing capital is obligatory. Shutting concern process in Italy is besides harder than in Korea. Than concern is decided to be closed 22 % of the estate should be paid in Italy than in South Korea merely 4 %.
Second, looking at trading across boundary lines figures Korea once more is much more suited for export or import orientated concerns than Italy. In 2010 Korea was in 8th topographic point from 183 of suited states for trading when Italy stands in fiftieth topographic point. In the Republic of Korea export and import stopping points 8days and cost 742 $ per container than in Italy exporter or importer demands to pay 1231 $ per container and it last 20days to export and 18days to import ( Making Business, 2010 ). However, the figure of paperss required by imposts and other bureaus in these states are about similar 3 in South Korea and 4 in Italy. Actually, the good conditions for trading could be explained that democracy of Korea is export oriented state which is intend to export its goods abroad deriving late more than 50 % of GDP from export.
Final facet which is important for successful development of entrepreneurial web is revenue enhancements. As we can see from the graph in Italy all revenue enhancement system is more hard than in the Republic of Korea. It is measured by three chief standards as clip, entire revenue enhancement rate and payments. In Italy it requires 334 hours per twelvemonth to fix and register revenue enhancement returns and to pay corporate income revenue enhancement value added revenue enhancement, sale revenue enhancement or goods and service revenue enhancement and labour revenue enhancements and compulsory parts than in Korea this process requires 250 hours. However, in both states the figure of payments is about equal in Italy -15 and in Korea – 14 per twelvemonth. When we look at revenue enhancements here we see a immense difference since in South Korea revenue enhancement rate is twice every bit low as in Italy. In Italy more than half net income ( 68,4 % ) is payed for revenue enhancements than in Korea merely 31,9 % ( Doing Business, 2010 ).
Overall Republic of Korea harmonizing to all facets analyzed in this chapter is more suited state for entrepreneurship than Italy. It provides better conditions to get down, to make and to shut concern. Furthermore, revenue enhancement system in this state is much better and revenue enhancements significantly lower, so in Italy. Besides, the trading conditions make this state 8th taking exporting or importing states in the universe ( Making Business, 2010 ).
4.0. Investing
Other cardinal facet for successful development of economic sciences is investing. Investing in machineries, edifices, and physical capital is indispensable for the capital stock to be improved and maintained ( OECD, 1997 ). Since the state has more investings, the better machinery are and accordingly it could supply more on the job topographic points. It means unemployment decreases merely thanks to investings. However, there are many factors, which influence the investing clime as macroeconomics stableness, the fiscal state of affairs, work force or managerial accomplishments. For more close survey of investings there is a demand to analyze Foreign Direct Investments ( FDI ) influxs and escapes in Italy and Republic of Korea.
4.1. Foreign Direct Investments
First, it is necessary to advert that overall GDP consists of private ingestion + gross investing + authorities disbursement + ( exports a?’ imports ) ( Wikipedia, 2010 ). Since in this chapter we are speaking about investing let`s mentality how many per centums of GDP is gained from FDI influxs and escapes and which state is more likely to put and pull more foreign investings
Graph 6: FDI net escapes Italy and South Korea ( 1990-2010 ). Beginning: World Bank
Graph 7: FDI cyberspace influxs Italy and South Korea ( 1990-2010 ). Beginning: World Bank
From the both graphs we can see that Italy non merely attracts more foreign investings so South Korea, but besides invests in foreign development greater per centum portion of their GDP. Recently, about 5 % of GDP was consisted of FDI influxs and escapes ( World Bank, 2010 ). Furthermore, during the old ages 2006- 2007 it can be seen that there are major addition in foreign direct investing inflows to Italy ‘s economic system. The chief ground for the addition was the flourishing demand of the luxury goods, which are one of the chief industries in Italy. However, it can be easy seen from the graphs nr.6 and nr.7, that during the period of 1998-2000 the Republic of Korea attracted significantly more foreign investing. The chief ground for that was the rapid development in technological industries all around the universe ( World Bank, 2008 ).
4.2. Reasons to put in Italy
There are many grounds to put in one or another state, but harmonizing to Invitalia there are eight chief grounds to put in this state. First, located in the bosom of the Mediterranean Sea, Italy is the chief thoroughfare associating southern Europe to northern and cardinal Europe by land, sea and air. Furthermore, companies make up one’s minding to put in Italy can trust on a broad substructure network.. Besides, Italy is ranked tenth among OECD states and 4th among European states for Gross Domestic Product with a value of more than 1.5 trillion in 2009. If it is still non plenty to make up one’s mind invest in Italy they say that Italy ranks sixth as the universe ‘s top state trade name in the Country Brand Index 2009, the international study of the image of more than 40 states in the universe ( Invitalia, 2010 ).
4.3. Reasons to put in the Republic of Korea
Sing to South Korea the chief ground to put is that it is quickly developing state which during the last half of century managed to go one of the taking export states in the universe ( IMF, 2010 ). In add-on, taking inventions attracts to put people in South Korea`s invention and technological concern. However, the chief ground for export and import oriented investors is that Korea was ranked as 8th universe economic system sing to merchandise across boundary lines. Furthermore, it has attractive geographical location standing following to other turning economic system states as China and Japan. And eventually, it has trade understanding with United Stated what is an attractive ground for foreign investors.
5.0. Culture
For full apprehension of economic phenomena, it is non merely necessary to pay attending to their political and legal dimension, but besides to the function that is played by civilization. ( Richard Swedberg, 2003, p.218 ). In this chapter we will look at values and norms in both states and how it helps for economic development.
5.1. Valuess and norms
It is necessary to depict what values and the norms really are. Talking about values we can state that it is an appraisal of what is tolerated to make and what is non. It is what is considered to be good or bad as, for illustration, niceness or cordial reception. Describing norms it could be said that it is a regulation of behaviour when ignorance of norms is punished. Actually, there are two sorts of norms: formal and informal 1s. Formal 1s consciously described as rational, than informal 1s helps to acquire work done ( Richard Swedberg, 2003, p.222 ).
The most cardinal value sing to economic public presentation is peoples trust. Actually, it can be found in some documents that degree of a trust of a community affects economic public presentation ( Knack and Keefer, 1996 ). People ‘s economic determinations can be affected by trust in several ways. Mostly international trade is the country where trust should count. Country that trusts more is more likely to interchange more goods and fiscal assets. In add-on, trust has positive and statistically important impact on the chance of going entrepreneurship. Furthermore, trust to others increase chance being self-employed by 14 % ( Luigi Guiso, Paola Sapienza and Luigi Zingales, 2006, p35 )
Graph 8: Most people can be trusted in Italy and South Korea. Beginning: World Values Survey
Now when it is known how it is of import trust in economic system let`s expression at Graph8 where is noticable that in both states the degree of trust is about equal about 29 %. It is non much, but besides non low. It means that about 1/3 of Koreans and Italians trus each other and for them it is easier to merchandise or go enterprisers. However, the biggest portion of both populations about 70 % says that you can`t be excessively careful. Whereas, it does non intend that they do non swear people at all merely seek to be more leery swearing new people.
Sing to the saloon graph the decision could be made that in these two states there is non high degree of trust, so it means that it does non hold great impact on economic results. Now when it is known how it is of import trust in economic system let`s expression at Graph8 where is noticeable that in both states the degree of trust is about equal about 29 %. It is non much, but besides non low. It means that about 1/3 of Koreans and Italians trust each other and for them it is easier to merchandise or go enterprisers. However, the biggest portion of both populations about 70 % says that you can`t be excessively careful. Whereas, it does non intend that they do non swear people at all merely seek to be more leery swearing new people. Sing to the saloon graph the decision could be made that in these two states there is non high degree of trust, so it means that it does non hold a great impact on economic results.
5.2. Religion
Culture besides can be defined as a faith and ethnicity what affects beliefs about trust. As we already know that trust is an of import factor in economic development it is necessary to detect how faith is related to peoples trust. Some researches showed being raised sacredly raises the degree of trust by 2 %. Furthermore, if a individual regularly attends spiritual services, the degree of trust additions by another 20 %. However, this believe applies more for Catholics and Protestants ( Luigi Guiso, Paola Sapienza and Luigi Zingales, 2006, p. 30 ).
Graph 9: Religious individual in Italy and South Korea. Beginning: World Values Survey
First, it is necessary to advert that in both states religions differs. In Italy spiritual people chiefly are Roman Catholics when in South Korea beliefs among spiritual people separate about every bit about 30 % among Buddhist, Roman Catholics and Protestants ( World Values Survey, 2010 ). First, looking at graph “ Religious individual ” it is seen that Italian people are more spiritual than Korean; 88 % of Italians are spiritual than about three times less Koreans believe in any faith. Harmonizing to the Luigi Guiso, Paola Sapienza and Luigi Zingales it means that Italians can be more sure than Koreans. However, harmonizing to World Values Survey in South Korea and in Italy about half of dwellers are likely to go to spiritual services at least one time a month what besides increases a degree of trust in this both states. In decision, harmonizing to faith and Luigi Guiso, Paola Sapienza and Luigi Zingales researches Italians are more trustful and trusted peoples than Koreans.
Decision
Sing to the four key factors mentioned in this paper we can see differences and similarities in both states economic development. Both states economic public presentations are first-class sing to the GDP; nevertheless, there were few fiscal crises during this period which aggressively reduced states GDP growing in one twelvemonth or another.
Furthermore, we can see challenging facts as, for illustration, in Korea it is easier to make and put up concern; nevertheless investors are more likely to put in Italy. Or that harmonizing to study people trust each other about every bit in both states, but analyzing faith in Italy theoretically should people swear more each other than in the Republic of Korea.
However, the comparing of this both states economics revealed that it is hard to find economic public presentation of states sing merely one factor. Since one state economically performs better in one field and other in another 1. However, there are more factors which could depict economic public presentation of these two states.
