Korea's Economic Growth and Catch‐Up: Implications for China

27 Pages Posted: 16 Sep 2016

Date Written: September–October 2016

Abstract

This study investigates the economic growth and catch‐up of Korea over the past half century. Korea's growth experience confirms the prediction of a "conditional convergence" theory. Cross‐country regression further suggests that Korea's strong catch‐up to the USA is also attributable to its favorable growth factors such as strong investment, lower fertility, greater trade openness, and improvements in human resources and rule of law. However, as Korea catches up to the USA and its steady‐state level in per worker output, it will be subject to a growth slowdown unless improvements are made in those growth factors. While manufacturing‐oriented and export‐oriented development has served Korea's success well, poor productivity performance in the services sector has hampered overall productivity growth. Korea's experience implies that China's potential growth rates are likely to slow in the coming decades due to the convergence effect and with the rebalancing toward a domestic consumption and services‐based economy. China needs to upgrade its rule of law, reform state‐owned enterprises and improve productivity, particularly in its services sector, to sustain strong growth.

Keywords: China, convergence, economic growth, Korea, structural change

JEL Classification: O11, O14, O47, O57

Suggested Citation

Lee, Jong-Wha, Korea's Economic Growth and Catch‐Up: Implications for China (September–October 2016). China & World Economy, Vol. 24, Issue 5, pp. 71-97, 2016. Available at SSRN: https://ssrn.com/abstract=2839582 or http://dx.doi.org/10.1111/cwe.12175

Jong-Wha Lee (Contact Author)

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

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