Assessment of Korean TFP Growth in the 2000s through the Comparison of Growth Accounting Methods
KDI Feature Article 2014 1st Half 1-10
11 Pages Posted: 23 May 2016 Last revised: 24 May 2016
Date Written: May 27, 2014
After comprehensively reviewing various methodologies related to productivity growth rate, this paper estimates that Korea’s TFP growth rate in the 2000s is not substantially lower than that in the 1990s.
This estimation implies that Korea’s TFP growth maintains a sustainable pace, and hence less likelihood of a sharp decline in growth in the future.
ｏDue to aging population, the growth in factor inputs such as labor and capital is gradually losing pace, causing unavoidable consequences of a slowdown in the entire economy to some extent, but if the pace of productivity growth is sustained, per capita income growth rate might not slow down sharply.
In particular, in the post-Asian crisis in 1997, when structuring reforms were actively pursued, productivity growth is estimated to increase higher than that in the pre-crisis period.
ｏThis paper divides the subject period into the 1990s and 2000s for comparison with precedent studies, but comparing the decade before the crisis (1988~1997) with that after the crisis (1998~2007) finds that the TFP growth rate in the post-crisis period turns out to be higher by 0.4 percentage point than that in the pre-crisis period.
ｏIt is thought that Korea’s productivity growth accelerating after 1998 has been significantly contributed by structural reforms across all sectors of the economy in the post-crisis period.
Therefore, consistent structural reforms are indispensable to maintain the growth pace in productivity.
ｏIt is not possible to quantitate effects of productivity growth brought by each and every one of huge number of structural reform agendas but it is mostly agreed that formulating a system that could uphold and develop the orders of market economy and operating it in a transparent manner are the most important factor in improving the productivity of overall economy.
ｏIt should be noted that, nevertheless, since the global financial crisis in 2008, policy focus has been largely on risk management of negative impacts, instead of fundamental structural reforms, according to some assessments.
- An explicit assessment is not easy in this case when taking into account repercussions from the global financial crisis, but this paper estimates that in most cases reviewed, productivity growth in the second half of 2000s is lower than that in the first half of 2000s.
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