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The Korean Advertising Production Industry and Its Effects on

 Advertising is not only a marketing tool to promote sales of goods and services but also an important vehicle to develop individual country’s economy, culture, and communications. In addition, in many capitalist societies, advertising has been an economic resource for operation of newspapers and broadcasting companies, while advertising content has contributed to the making of national cultures and identities as playing a role of cultural products. Moreover, it has been a facilitator for enhancing national images. For these reasons, the advertising industry has been regarded as one kind of information industries or service industries, and thus, many countries support the industry as a way to strengthen competitiveness of the national Add space between economy and parentheses.

 Despite the important role of the advertising industry in both the media industries and the national economy, research on the industry has mostly focused on the sales of advertising products and the effects of advertising content. Consequently, studies on the production of the advertising content are limited, and therefore, little is known about the value of the advertising production industry and its economic impacts on the national economy. In order to fill this gap, the present study examines the advertising production industry in Korea and its economic association with the Korean economy. Specifically, the study aims to help understand the status and characteristics of the advertising production industry in Korea within the Korean national economy, and further emphasizes the industry’s strategic importance with the impacts on the Korean economy. Given that the Korean economy is one of the most rapidly growing economies in the world, and the media industry in general in Korea has continuously expanded together with the upgraded information and communication infrastructures, an investigation of the advertising production industry in Korea and its contribution to the Korean economy will provide implications on studies of the advertising production industry in other countries.

The Advertising Production Industry and the Industry Relation Analysis

 The advertising industry can be divided into four sub-categories following the value chain of the industry: 1) advertising production; 2) advertising infrastructure; 3) agencies; and 4) advertising related services (Oh, 2008). The first category, advertising production, includes production of copies, graphic, video content, commercial messages (CM), and photos, while the part of advertising infrastructure includes companies for printing, studios, billboard production, and outdoor advertising production. Advertising agencies are typically in charge of distribution of advertisements, connecting advertisers, production companies, and a variety of media outlets. Advertising related services include research, public relations, and event companies. In the present study, we define the advertising production industry that includes three areas of the whole industry except for advertising agencies given that all other categories are involved in production of advertising to some extent.

 Based upon this categorization of the advertising production industry, the current study seeks an economic analysis of the effects of the industry on the Korean economy. There can be two economic approaches: micro and macro approaches. The micro-economic approach includes the method of estimating production function and demand function, while the macro- economic approach encompasses comparison of nations and industry relation analysis. Among these methods, the production function estimation, demand function estimation, and comparative method require sufficient degrees of freedom for statistical analyses. However, there are a few reasons that make these methods implausible in the advertising production industry in Korea. First, accumulated data in the industry is limited. Second, it is not easy to figure out the correct market size of the advertising industry because of a variety of involved entities in the industry such as advertisers, advertising agencies, production companies, and so on. Third, since the current advertising related data were collected from advertising agencies or advertising-related institutions, other parties have limited access for further research (Department of Culture, Sports and Tourism & KOBACO, 2009). Finally, the scale of the advertising industry is still relatively small and there exist many small companies, which in turn makes the related micro and macro data insufficient.

 Thus, the current study employs the industry relation analysis, in other words, input-output analysis. The industry relation analysis is a general equilibrium model that enables us to analyze the relationships between the industries associated with the advertising production industry. It also makes it possible to investigate both the advertising production industry at the micro level and the other related industries at the macro level. In addition, it is possible to assess the effects of the industry on the national economy including the production facilitating effect, added-value facilitating effect, import facilitating effect, and employment facilitating effect.

Advantages of the Industry Relation Analysis

 The industry relation analysis examines the inter-relationships of the industries from the production activities in quantitative measures. In general, it specifies all transactions occurred in the process of production and distribution of goods and services in all industries. Then, it tabulates the comprehensive statistics with which the effects of the final expenditure from consumption, investment, and export on the production activities of each industry can be quantitatively analyzed.

 The industry relation analysis is an analytical tool with linear programming, and it has the following advantages: First, the industry relation analysis shows how the change of production level in one industry induces continuous demand of products in other industries. Thus, it has been regarded as a useful method to analyze and predict the overall effects on the national economy given its characteristics of the general equilibrium model emphasized on the relationships between the sales of input factors and the purchases (Miller & Blair, 1985). In other words, it organically combines the parts and the sum in the whole national economy, including the circulation of goods between industries. Therefore, it is useful to analyze the economic structures and the inter- relationships between industries, which are difficult to analyze with macro approaches (Kang, 2000). Second, the industry relation analysis provides the analysis of production, employment, revenues of industries depending upon the changes in consumption, investment, and export. In addition, it suggests the making of economic plans, predictions, and policies on industrial structures. Third, the industry relation analysis makes it possible to estimate the effects of implementation of economic policies on production, revenue, and price because it provides the analysis of the changes in the final demand including consumption, investment, export and their effects on each industry’s production and revenue. By using this estimation, it is also possible to analyze the effects of the changes in demand, supply, or price on other industries or the national economy. Fourth, it enables us to easily conduct the estimation of the effects of the changes in price in particular industries on the price level as a whole, given that the analysis provides a tool to analyze the effects of particular industries’ price depending on the changes of added values in wages and profits.

History of the Industry Relation Analysis

 The industry relation analysis was first introduced in 1936 by Wassily W. Leontief. Leontief tried to use the industry relation analysis as empirical research that integrates with Wallas’ general equilibrium theory which had been an abstract theoretical model (Miller & Blair, 1985). Leontief was awarded with the Nobel prize in economics by predicting the level of steel production and its related employment after the World War II with the industry relation analysis. In Korea, the tabulation of industry relation was started in 1957 and 1958 by then the Industry Development Committee of the Department of Reconstruction (Bank of Korea, 1987). But, a more systematic format and content of the industry relation table was developed in 1960 by the Bank of Korea. This table was requested by the Korean government to be used as basic information for the first 5-year plan for economic development. It was completed after a one and half year work, and thereafter, it has been made to understand the expansion of the Korean economy and the change of industrial structures. From 1963 to 1995, the table for actual industry relation was developed every 5 years to be used as basic materials for the economic development planning and policy making. In addition, from 1968 to 1998, the extended table was developed for diverse analyses of the Korean economy. The most recent table was issued in 2009 for the industry relation in 2006.

 Structure of the Industry Relation Table

 An example of the industry relation table is shown in Table 1. If we look at the table vertically, we can see that 1) the intermediate-input part in which a particular industry’s purchase amount of the products from other industries can be seen, and 2) the value-added part in which the amount the industry paid for the raw production components can be seen. Then, if we look at the table horizontally, we can see how much the products of a particular industry were sold as an intermediate good and how much the products were sold as a final good in the part of the final demand.

Table 1 . A Sample of the Korean Industry Relation Table

 Producer Price and Buyer Price

 There are two types of price in the industry relation table: producer price and buyer price. The producer price means the price charged from the producer’s location, excluding the cost of transportation and the margin from distribution. Thus, because the producer price is estimated based on the price with which the producer receives at the return of product sales, the cost of transportation and the margin from distribution, which are the differences between the amount of payment when a product is purchased and the actually received amount, are treated as paid to transportation and distribution. Therefore, the output from each industry is assessed as the price of free on board (FOB) used in the trade transactions.

 The buyer price is the price when a buyer purchases a product, and the cost of transportation and the margin from distribution can be included. That is, because the cost of transportation and the margin from distribution that are beyond the actually received amount of money are treated as a service purchase, the buyer price is estimated with the delivered price, in other words, the cost of insurance and freight (CIF).

 Because the producer price applies the different margins from distribution depending on industries excluding the effect from the differences, it is adequate to analyze the interdependency between industries compared to the buyer price. In addition, although the buyer price is realistic given that it reflects the actual transactions of goods and services, the producer price is more appropriate because it focuses upon production technologies, especially the stability of the input coefficient.

Industry Relation Tables of Competitive Imports and Non-Competitive Imports

In the case of making the industry relation table for open economies where trades with other countries are free, there are two types of the table although the format of the table depends on how imports can be treated: table of competitive imports and table of non-competitive imports. The table of competitive imports does not distinguish whether a product or service is produced in domestic or abroad as long as the type of the product or service is the same, and makes the table comprehensively with one part of demand. In contrast, the table of non-competitive imports divides the products from the domestic country and the ones produced abroad even if the same types of product or service are examined. Therefore, the table of non- competitive imports consists of 1) the table of transactions in the domestic country and 2) the table of transactions for the imported products. The advantages and disadvantages of the two tables are as follows. In the table of competitive imports, it is hard to sort out the import facilitating effect among the effects of production induced by the changes in the final demand, while it is possible to measure the import facilitating effect thanks to the specification of the input structure of imported products in each industry. Thus, by using the table of non-competitive imports, it is also possible to divide the production-derived effect from the change in the final demand into the domestic production facilitating effect and the import facilitating effect. However, it is hard to estimate whether the domestically produced or import input coefficient is stable, because the input structure between the domestic products and the imported products of the same type of products can be changed depending on the economic conditions of a particular industry (Bank of Korea, 1987).

The Basic Model of the Industry Relation Analysis

 In order to examine the derived effects from the advertising production industry, the focus should not be placed on the changes of the final demand only, given that the final demand is not the total demand, and even if it is the total demand, it should be equal to the total supply in the market. Therefore, in a stricter sense, the focus should be placed on the changes of the total outputs in the advertising production industry. Moreover, it should be noted that an investigation of the effects on other industries from the changes in the advertising production industry cannot be conducted with conventional analyses, because it is not logical to analyze the increase of the advertising production industry’s outputs depending on the increase in the final demand of the industry.

 These problems can be solved through exogenous specification in the table of industry relation. The change in one industry can act as an external force into the economic model. The industry relation analysis makes it possible to examine the effect of an exogenous variable on the endogenous economic parts when endogenous variables and the exogenous variable are mixed, which is called exogenous specification (Miller & Blair, 1985). The method of exogenous specification helps to clearly understand the effect of the outputs in a particular industry instead of the total demand, and the outputs’ effect on other industries. For exogenous specification, it is necessary to make a separate table of industry relation that treats the advertising industry (h) as an exogenous part. Table 2 is the one that was adjusted to analyze the effect of the change in investment (output) in the advertising industry (h).

Table 2 . An Industry Relation Table with Exogenous Specification of a Particular Industry

If X_ij  = a_ij X_j , in other words, if a_1j , a_2j , …, a_nj  is from X_1j  , X_2j , …, X_nj divided by the total input, Xj, it becomes the input coefficient that represents the amount of the products from each industry, which are necessary for production of one unit product from j industry. In the same fashion, if the j industry’s value-added amount is divided by the total input, it becomes the ratio of value-added which represents the amount of value-added when one unit of product in the j industry is produced. Similarly, if we have the following matrix equations from the first row to the nth row including all industries, it is possible to obtain the input coefficient.

 These equations can be expressed as follows as well.

Therefore, we can derive the following equation.

Where, : reverse matrix of the domestic input coefficient when a particular part is deleted.

 A^d _k : domestic input coefficient of a particular part

 Based on this, if we calculate other industries’ production facilitating effect (indirect effect) induced from a particular part’s (h) production activities (∆Xh),

 
then, if the change of the final demand (∆Fd) equals zero (0), the final production facilitating effect is the equation (1).

 The equation (1) is especially called, the demand-driven model (Yoo et al., 2008), because it is possible to estimate the necessary amount of output (X) in order to meet the final demand (∆Fd) by using the equation (1).

 In addition, by using the demand-driven model, it is possible to analyze the production facilitating effect, value-added facilitating effect, and employment facilitating effect. That is, in a similar fashion, it is possible to estimate the amount of value-added, amount of import facilitation, and the number of employment facilitation, which were induced from the change in the output of a particular part. Table 3 shows how the effects used in the present study can be calculated. Each equation includes both indirect and direct effects.

Table 3 . Model of a Particular Part's output Change Effect

Linkage Effects between Industries

There exist linked relationships between industries because the products of each industry can be used not only as the final goods for consumption but also as the intermediate goods for other industries’ production. The index of these interrelationships between industries is the industry linkage effect (Bank of Korea, 1987; Hong & Park, 1997).

 There are two types of industry linkage effects: forward linkage effect and backward linkage effect. The forward and backward linkage effects can be explained as follows. Let’s assume that the j industry’s production was increased. In this case, in order to have more production in the j industry, the increased input from other industries is required. In turn, the j industry induces the increase of input in other industries, in other words, increasing the demand from the j industry. It is called the backward linkage effect of the j industry. Now, let’s assume that the increase of production in the j industry occurred. It not only met the final demand but also increased the supply of the intermediate good, j, within the entire industry, which can be called, the forward linkage effect of the j industry (Miller & Blair, 1985).

 There are various ways to examine the forward and backward linkage effects (Hirschman, 1958; Jones, 1976; Rasmussen, 1956). However, the current study employs the well-known sensitivity coefficient and influence coefficient. Both are useful to an industry’s direct and indirect production facilitating effects since they use the production facilitation coefficient.

 The sensitivity coefficient (FLi), which indicates sensitivity of dispersion, shows the forward linkage effect. It is the effect that a particular industry receives when the final demand increases with one unit from all industries’ products. It is also the coefficient that shows the forward linkage effect of a particular industry compared to the average of all other industries. The sensitivity coefficient can be calculated by the column sum of a particular industry’s production facilitation coefficient divided by all industries average, as shown in the equation (2) below (Bank of Korea, 1987).

 In the case of the advertising production industry, the sensitivity coefficient means the effect that the industry is influenced as an intermediate good when the production demand increased by one-unit from all industries. In general, the more an industry’s product is used as an intermediate good, the greater the sensitivity coefficient is.

 
Where, r_i : i industry’s production facilitation coefficient column vector
r_ij : all industries’ production facilitation coefficient matrixe
e: unit column vector, e’: unit row vectorn
n: the number of parts

 The influence coefficient (BLi), which indicates power of dispersion, shows the backward linkage effect. It is the effect on all industries when the final demand for a particular industry’s products is one-unit increased. Also, it is the coefficient represented by the amount of the backward linkage effect compared to the average of all industries. As shown in the equation (3), it can be calculated by the row sum of the production facilitation coefficient of a particular industry divided by the average of all industries (Bank of Korea, 1987).

 In the case of the advertising production industry, the influence coefficient is the effect that all industries are influenced as an intermediate good when the demand of the product in the advertising production industry is one-unit increased. In general, the greater a particular industry’s production facilitation coefficient is, the greater the influence coefficient is.

 
The interrelationships between industries can be also found from the amount of the ratio of the intermediate demand and the intermediate input of each industry (Kang, 2000). All industries can be classified with the following four types depending on whether each industry’s ratio of the intermediate demand or the intermediate input is more or less than all industries’ ratio of the average intermediate demand or intermediate input: First, the intermediate demand manufacturers whose forward and backward linkage effects are both high; second, the intermediate demand primary industries whose forward linkage effect is high while backward linkage effect is low; third, the final demand manufacturers whose forward linkage effect is low while backward linkage is high; and fourth, the final demand primary industries whose forward and backward linkage effects are both low (Bank of Korea, 1987).

Analysis of the Effects of the Advertising Production Industry on the Korean Economy

 Unit of Analysis

 The unit of analysis in the present study is the advertising production industry in Korea. As shown in Table 4, the advertising industry consists of four value chains (i.e., infrastructure, production, distribution, and service). Among these sectors, the distribution part is regarded that it does not directly affect advertising production given that its profits are derived from the business of advertising agencies or media agencies. Therefore, the unit of analysis is the businesses in the parts of infrastructure, production, and service. The sales amount from these three sectors was 2,665.7 billion Korean Won (KW) in 2007, which was about 28.3% of the entire advertising industry. Among these sectors’ sales, that of the production part was 1,574 billion KW (59%), while that of the service and infrastructure parts was about 500 billion KW each, 21% and 20%, respectively.

Table 4 . The part of Infrastructure (million KW)

Table 5 . The part of Production (million KW)

Table 6 . The part of Production (million KW)

 Reconstruction of the Industry Relation Table

 In order to analyze the effects of the advertising production industry on the Korean economy, it is necessary to closely look at the businesses in the value chains and reconstruct the industry relation table matching the classification of the industries. The current study used the 2006 industry relation table issued in 2009. Also, the table of domestic transactions from the table of non-competitive import was chosen in order to investigate the effects of the advertising production industry on the Korean economy. The 2006 industry relation table consists of a total of 403 basic industries among which 367 basic industries are associated with the advertising industry. Thus, the current study reconstructed the industry relation table by a reclassification of the industries.

 In the industry relation table, the part of the advertising industry includes all advertising activities such as advertising planning, production of advertising materials, persuasion of advertising via mass advertising media, and distribution of advertising materials and samples on behalf of advertisers. Thus, it includes advertising agencies, advertising in broadcasting, newspapers, magazines, new media, production of advertising materials, and other advertising related services. The statistical data for the agency business can be collected from the documents from the Korea Broadcast Advertising Corporation (KOBACO), the analysis of the total cost of advertising from Cheil Communications, the materials from the Association of Advertising Agencies in Korea. Other advertising related data can be obtained by subtracting the revenue of advertising agencies from the cost of broadcasting advertising, and then adding the revenues from sponsors (Bank of Korea, 1987).

 Therefore, the part of the advertising industry includes production of CM, audio-visual, copies, graphics, online advertising, CI, and advertising planning and editing in the value chain of advertising production, and advertising photo studios, equipment businesses, except for marketing and research. Yet, printing and photoengraving of the part of infrastructure are more relevant to the basic parts numbers 129 (printing) and 130 (recording media printing and copying) or the ‘print and copy industry’ of the integrated grand classification number 6 rather than the part of the advertising industry.1) The printing industry includes all manufacturing activities of general printed materials except for printing of ad materials, commercial calendars, newspapers, books, and magazines. In addition, the printing industry also includes service activities for the printing business such as binding, typesetting, bookbinding, and print material processing, as well as production of special print materials such as paper money, securities, bonds, and post stamps. The recording media printing and copying includes copy of voice and other audio materials and video tapes (Bank of Korea, 1987).

 ) The industry relation table until 2003 combined newspapers, publication, print, and recording media printing and copying as a part of the printing, publishing, and copying industry in the integrated grand classification number 6. However, the 2006 issue separated newspapers (384) and print (385) industries as a part of ‘social and other services’ (the integrated grand classi-fication number 27). The change was made due to the fact that the part of newspapers and printing is more about gathering, processing, and delivering of information as a communication industry, instead of printing processing. Thus, the current study follows this changed classification given that the study intends to examine the industrial structure of the advertising printing and photoengraving. 

 Meanwhile, marketing and research in the service part is the business that provides information about advertising targets and effects, and it is relevant to the ‘market research and management consulting’ of the basic part number 362 in the industry relation table. The information provision service includes the activities of collecting, sorting, and analyzing the materials about the market and consumers’ opinions as well as the activities of providing news reports and news photos to publication companies, broadcasting companies, and information providers. The calculation of outputs is based on the amount of external transactions from the National Tax Service for opinion polls, market surveys, business and management consulting, and credit search, while the sales amount of the service industry statistics report from the Statistics Bureau can be used for the provision of news. In the present study, the marketing and research part was included in the advertising industry, but not separately analyzed, because its annual sales was about 10.9 billion KW, which was about 0.41% of the entire advertising industry’s sales, and thus the error would be minimal. Based upon these investigations, the final industry relation table consists of 29 industry parts, as shown in Table 7.

Table 7 . Reclassification of the Industry Relation Table

 In sum, given that the advertising industry, the advertising production industry in particular, includes some businesses that are not relevant to the characteristics of the industry, the present study conducts the analyses that are most relevant to the characteristics of the industry, and further quantitatively estimates more accurately derived effects of the industry on the Korean economy. For this purpose, an additional analysis on the printing and copying industry will be conducted in addition to that on the advertising industry.

 Analysis of Economic Derived Effects

 The economic derived effects such as each industry’s production facilitating effect, value-added facilitating effect, and employment facilitating effect can be obtained by exogenous specification in the demand-driven model. Table 8 shows the economic derived effects of the advertising industry.

Table 8 . The Derived Effects of Advertising Industry on the Korean Economy

 First, the production facilitating effect of the advertising industry on other industries was 2.6307. It means that if the amount of output in the advertising industry increases by 1KW, it induces the production of 2.6307 KW in the whole economy, which is relatively high. Also, the indirect production facilitating effect, which is about the production facilitating effect on other industries except for the advertising industry, is 1.6307, and it is greater than the direct effect.

 Except for the advertising industry whose direct production effect is 1, the effect on ‘communication & broadcasting’ (part 22) is the highest at 0.53785, followed by ‘social & other service’ (part 27) at 0.33651 and ‘real estate’ (part 24) at 0.16909. In contrast, ‘public administration & defense’ (part 25) and ‘minerals’ (part 2) showed the lowest production facilitating effect at 0.00057 and 0.00061, respectively.

 Meanwhile, the value-added facilitating effect from the advertising industry was 0.8523. It indicates that if the amount of output in the advertising industry increases by 1KW, it induces the value-added of 0.8523 KW in the whole economy among which the direct facilitating effect was 0.10308 while the indirect facilitating effect was 0.7492. The value-added facilitating effect is the same concept as Gross Domestic Product (GDP), and it is important in that it reflects the industry structure.

 The effect on ‘communication & broadcasting’ (part 22) is the highest at 0.25497, while that on ‘social & other service’ (part 27) is 0.16804 and ‘real estate’ (part 24) is 0.11937. The direct value-added facilitating effect on the advertising industry is 0.10308. In contrast, ‘other’ (part 28) and ‘minerals’ (part 2) showed the lowest value-added facilitating effect at 0.0 and 0.00036, respectively.

 Finally, the employment facilitating effect from the advertising industry was 17.102. It indicates that if the amount of output in the advertising industry increases with 1 billion KW, it induces the employment facilitating effect of 17.102 people on other industries. It also increases 3.59127 people in the advertising industry itself, while increasing 13.5107 people in other industries.

 The highest employment facilitating effect was shown in ‘social & other service’ (part 27) with 5.76227 people, followed by ‘wholesale & retail’ (part 19) with 1.62710 people and ‘communication & broadcasting’ (part 22) with 1.59569. In contrast, ‘other’ (part 28) and ‘minerals’ (part 2) showed the lowest employment facilitating effect at 0.0 and 0.00342, respectively.

 Meanwhile, the production facilitating effect of the printing industry was 1.78713, which is lower than that of the advertising industry, and the indirect effect was 0.78712, lower than the direct effect. The value-added facilitating effect was 0.69836, lower than that of the advertising industry, and the direct effect was 0.41544 while the indirect effect was 0.28292. The employment facilitating effect was 15.327771, lower than that of the advertising industry, and the direct effect (9.58906) was higher than the indirect effect (5.73866).

Table 9 . The Derived Effects of the Printing Industry on the Korean Economy

 To sum up, the economic facilitating effect of the advertising industry is higher than that of the printing industry. In other words, the advertising industry has a greater effect on the Korean economy when the same amount of production is added to each industry. In addition, in the advertising industry, the indirect facilitating effect was higher than the direct facilitating effect in all parts. It confirms that the advertising industry is more associated with other industries than the printing industry. Therefore, it can be said that stimulating the advertising production industry can be an efficient alternative to the growth of the national economy. Finally, the effect was greater on the service industries compared to the manufacturing industries.

 The Forward and Backward Linkage Effects of the Advertising Industry

 It is possible to examine the forward and backward linkage effects of a particular industry by the sensitivity coefficient and the influence coefficient. The sensitivity coefficient is an index for the forward linkage effect, representing the effect on the advertising industry when the final demand of products in all other industries increases with one unit, in other words, the effect on the advertising industry as an intermediate good. In general, the more products of an industry are used as an intermediate good, the greater the sensitivity coefficient is. Also, if the sensitivity coefficient is greater than one, it is generally assumed that the industry has a greater sensitivity than the average of other industries.

 The backward linkage effect can be measured by the influence coefficient. It indicates the effects on other industries when the final demand of products in the advertising industry increases with one unit. Generally, the greater the production facilitating effect of other industries is, the greater the influence coefficient is. Also, if the influence coefficient is greater than one, it is conventionally assumed that the influence is greater than the average of other industries.

 The forward and backward linkage effects of the advertising industry are shown in Table 10. The sensitivity coefficient of the advertising industry is 0.6112, less than the average of other industries, which is the 25th among 29 industries. In contrast, the influence coefficient is 1.3554, the second highest among all industries. The sharp difference between the forward and backward linkage effects of the advertising industry implies the small effect of the economic development and achievements on the advertising industry in general. Thus, the advertising industry is prominent with the final demand characteristics rather than the intermediate demand characteristics. In addition, the fact that the influence coefficient is high indicates the large derived effect induced by the payment to the advertising industry. Therefore, the advertising industry contains the characteristics of the manufacturing industries rather than those of the primary industries.

Table 10 . The Sensitivity Coefficient and the Influence Coefficient of Each Industry

 In the case of other industries’ influence coefficient, the part of other is the highest at 1.4479, followed by the part of transportation at 1.2511, the part of metals at 1.2029, and the part of general machines at 1.1964. For the sensitivity coefficient, the part of chemicals is the greatest at 1.9190, followed by the part of first metals at 1.8582, the part of real estate at 1.7583, and the part of wholesale & retail at 1.3012.

 It is also possible to classify all industries based on the amount of the forward and backward linkage effects, as shown in Table 11. If the forward linkage effect (sensitivity coefficient) is high, it can be interpreted that the output of a particular industry is mainly used as an intermediate good because the industry is sensitive to the production increase of other industries, which in turn can be classified as an industry of the intermediate demand. In contrast, if the backward linkage effect (influence coefficient) is high, it can be interpreted that a particular industry facilitates other industries’ production since other industries’ products are used as an intermediate good. Thus, it can be classified as a manufacturing industry that combines raw materials or parts from other industries for its products.

 Taken together, if both the forward and backward linkage effects are high, a particular industry can be regarded as a model of intermediate manufacture, while if the forward linkage effect is high and the backward linkage effect is low, an industry will be a model of intermediate primary production. If the backward linkage effect is high and the forward linkage effect is low, a particular industry can be regarded as a model of final manufacture, while if both the forward and backward linkage effects are low, an industry will be a model of final primary production (Bank of Korea, 1987).

 In the case of the advertising industry, the sensitivity coefficient is less than one and the influence coefficient is greater than 1, and thus, the forward linkage effect is low and the backward linkage effect is high. Thus, it can be an industry of final manufacture, which includes minute machines and other manufacturers. These industries are indispensable industries that are not sensitive to economic fluctuations and they facilitate other industries’ production.

 Meanwhile, the industries of chemicals and metals are a model of intermediate manufacture, which is sensitive to economic fluctuations but facilitates other industries’ production. The industries of communications & broadcasting, finance & insurance, real estate, and wholesale & retail are a model of intermediate primary production, which is sensitive to economic fluctuations and its production facilitating effect on other industries is low. Finally, the industries of public administration & defense, education & health are essential public services that are not sensitive to economic fluctuations, and their production facilitating effect on other industries is low as a model of final primary.

TAble 11 . Classification Based on the Forward and Backward Linkage

 The Advertising Industry’s Effect on the Korean Economy

 As the final step of the input-output analysis, the current study quantitatively estimates the effect of the advertising production industry on the Korean national economy by using the coefficients examined above. As described earlier, the advertising production industry includes infrastructure, production, and service, and the study utilizes the facilitating coefficients of the advertising industry. For printing and photoengraving, the study utilizes separate facilitating coefficients of the printing industry in order to estimate strictly. As shown in Tables 4, 5, and 6, the total amount of production in the advertising production industry in 2007 was 2,665.7 billion KW among which the amount of printing and photoengraving was 338.7 billion KW and the amount from the rest was 2,327 billion KW.

Table 12 . The Effect of the Advertising Production Industry on the Korean Economy

 It was found that the production facilitating effect of the advertising production industry on the Korean economy was 6,727 billion KW. From this amount, the indirect production facilitating effect of the advertising production industry on other industries was 4,612 billion KW, greater than the direct effect. Also, the value-added facilitating effect was 2,219.8 billion KW among which the value-added facilitating effect on other industries was 1,839.2 billion KW, greater than that on the advertising production industry itself. Since the sum of value-added is equal to GDP, the value-added facilitating effect can be interpreted as how much the effect contributes to the growth of GDP. In addition, the import facilitating effect of the advertising production industry was 356.7 billion KW, only 5.3% of the production facilitating effect. It indicates that the domestic production meets the demand of the industry.

 Finally, the employment facilitation from the advertising production industry in 2007 was 44,988 people. Out of this number of people, 5,191 people were employed in the printing & photoengraving industry, while 39,797 people were employed in the advertising production industry. However, these employment facilitating effects were additionally induced in 2007, but these numbers indicate the whole number of people who participated in the advertising production industry in general in 2007.

Conclusion

 The present study examined the advertising production industry in Korea and its economic impacts on the national economy by employing the industry relation analysis. Specifically, the study utilized the forward and backward linkage effects to investigate the industry’s direct and indirect facilitating effects on the national economy through the sensitivity coefficient and the influence coefficient. When we compared the advertising production industry with the printing industry in terms of the economic facilitating effects, the advertising production industry has a greater effect on the Korean economy than the printing industry. Also, in the advertising production industry, the indirect facilitating effect was greater than the direct facilitating effect in all parts. It indicates that the advertising production industry is more associated with other industries than the printing industry. In addition, the economic facilitating effects from the advertising production industry were greater on the service industries compared to the manufacturing industries.

 Further, there existed a significant difference between the forward and backward linkage effects in the advertising production industry. It implies that there is only a small effect of the economic development and achievements on the advertising production industry. Thus, it can be said that the advertising production industry is prominent with the final demand characteristics rather than the intermediate demand characteristics. The advertising production industry’s influence coefficient, which represents the backward linkage effect, was relatively high indicating the large derived effect induced by the payment to the advertising production industry. It means that the advertising production industry contains the characteristics of the manufacturing industries rather than those of the primary industries. In contrast, the sensitivity coefficient of the advertising production industry, which represents the forward linkage effect, was relatively low indicating that the industry is a model of final manufacture. In conclusion, these findings suggest that stimulating the advertising production industry can be an efficient alternative to the growth of the Korean economy.

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