Environmental Regulation, Process Innovation and Social Cohesion in Korea

Combining input-output analysis and the growth-accounting formula of total factor productivity, this paper unveils the links between environmental regulation, process innovation, and social cohesion in Korea. Focusing on interactions between CO2 emissions regulation and inter-industrial performance, this paper first explores the spillover role of the process innovation of major manufacturing sectors in overall price competitiveness in Korea. Then, it simulates the countervailing economic spillover effects of process innovation on income inequality in the face of CO2 emissions regulation and provides policy recommendations for Korea.