XML

Seoul Journal of Economics - Vol. 20 , No. 1
[Paper List] [Go to Volume List]

[ Article ]
Seoul Journal of Economics - Vol. 20, No. 1, pp. 23-58
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2007
Received 20 Nov 2006 Revised 08 Jan 2007

Productivity Growth and Patterns of Efficiency Changes in Korean Economy: Stochastic Frontier Approach with Industry-Panel Data
Young Hoon Lee ; Hak K. Pyo
Professor, Department of Economics, Hansung University, 389 Samsundong 3ga, Sungbuk-gu, Seoul 136-792, Korea, Tel: +82-2-760-4066, Fax: +82-2-760-5855 (yhlee@hansung.ac.kr)
Professor, School of Economics, Seoul National University, Seoul 151-746, Korea, Tel: +82-2-880-6395 (pyohk@plaza.snu.ac.kr)

Funding Information ▼

JEL Classification: D24, C23, O47

Abstract

This paper applies the group-specific stochastic frontier production model to the Korean 32-industry level panel data set for the period of 1984-1997. The methodology allows for not only estimating temporal variation in total factor productivity, but also identifying the contribution of technical efficiency separately from technical progress. The empirical results of this study show that productivity growth of Korean economy was driven mainly by technical efficiency improvement in the 1980s, but by technical progress in the 1990s. At the industry level, the petroleum products industry was the most efficient in the 1980s, but its efficiency rank fell to 5 in 1997. On the other hand, the communication industry improved its technical efficiency dramatically; its technical efficiency growth rate was ranked at 14 in 1985, but at 1 since 1993.

Keywords: Total factor productivity, Technical efficiency, Technical progress, Stochastic frontier production model, Panel data
Acknowledgments

This paper was presented at 14th Seoul Journal of Economics International Symposium, Sustainable Growth in East Asia, November 24, 2006, Seoul National University. The first author acknowledges that this research was financially supported by Hansung University in the year 2007.

References
1. The Bank of Korea. National Accounts. The Bank of Korea, 1999.
2. The Bank of Korea. National Accounts. The Bank of Korea, 2004.
3. Battese, G. E., and Coelli, T. J. “Frontier Production Functions, Technical Efficiency and Panel Data with Application to Paddy Farmers in India.” Journal of Productivity Analysis 3 (Nos. 1-2 1992): 153-69.
4. Dollar, D., and Sokoloff, K. “Patterns of Productivity Growth in South Korean Manufacturing Industries, 1963-1979.” Journal of Development Economics 33 (No. 2 1990): 309-27.
5. Hall, R. E., and Jorgenson, D. W. “Tax Policy and Investment Behavior.” American Economic Review 57 (No. 3 1967): 391-414.
6. International Monetary Fund. The Role of the IMF in Recent Capital Account Crises. Washington DC: Independent Evaluation Office, 2003.
7. Jorgenson, D. W., Gollop, F. M., and Fraumeni, B. M. Productivity and US Economic Growth. Cambridge, MA: Harvard University Press, 1987.
8. Jorgenson, D. W., and Yun, K. Y. Tax Reform and the Cost of Capital. Oxford: Oxford University Press, 1991.
9. Kim, S. H., and Han, G. “A Decomposition of Total Factor Productivity Growth in Korean Manufacturing Industries: A Stochastic Frontier Approach.” Journal of Productivity Analysis 16 (No. 3 2001): 269-81.
10. Kim, S. H., and Lee, Y. H. “The Productivity Debate of East Asia Revisited: A Stochastic Frontier Approach.” Applied Economics 38 (No. 14 2006): 1697-706.
11. Kumbhakar, S. C. “Production Frontiers, Panel Data, and Time-Varying Technical Inefficiency.” Journal of Econometrics 46 (Nos. 1-2 1990): 201-11.
12. Kumbhakar, S. C., and Lovell, C. A. K. Stochastic Frontier Analysis. Cambridge: Cambridge University Press, 2000.
13. Kuroda, M. The International Comparison of the Productivity among Pan-pacific Countries. Mimeograph, 2001.
14. Kuroda, M., and Nomura, K. “Productivity Comparison and International Competitiveness.” Journal of Applied Input-Output Analysis 5 (1999).
15. Lee, Y. H. “A Stochastic Production Frontier Model with Group-Specific Temporal Variation in Technical Efficiency.” European Journal of Operational Research 174 (No. 3 2006a): 1616-30.
16. Lee, Y. H. Group-Specific Stochastic Production Frontier Models. Paper Presented at Asia-Pacific Productivity Conference in Seoul, 2006b.
17. Lee, Y. H., and Schmidt, P. “A Production Frontier Model with Flexible Temporal Variation in Technical Inefficiency.” In H. Fried, C. A. K. Lovell, and P. Schmidt (eds.), The Measurement of Productive Efficiency: Techniques and Applications. Oxford: Oxford University Press, 1993.
18. Mahadevan, R., and Kim, S. “Is Output Growth of Korean Manufacturing Firms Productivity-Driven?” Journal of Asian Economics 14 (No. 4 2003): 669-78.
19. Park, S. R., and Kwon, J. K. “Rapid Economic Growth with Increasing Returns to Scale and Little or No Productivity Growth.” Review of Economics and Statistics XVII (No. 2 1995): 332-51.
20. Pyo, Hak K. A Synthetic Estimate of National Wealth of Korea, 1953-1990. KDI Working Paper No. 9212, Korea Development Institute, 1992.
21. Pyo, Hak K. Estimates of Fixed Reproducible Tangible Assets in the Republic of Korea, 1953-1996. KDI Working Paper No. 9810, Korea Development Institute, 1998.
22. Pyo, Hak K. Excess Competition, Moral Hazard, and Industries Trauma in Korea (1997-1998).” In U. Dadush, D. Dasgupta, and M. Uzan (eds.), Private Capital Flows in the Age of Globalization: The Aftermath of the Asian Crisis. Edward Elgar Publishing in Association with OECD and the World Bank, 2000.
23. Pyo, Hak K. “Estimates of Capital Stocks by Industries and Types of Assets in Korea (1953-2000).” Journal of Korean Economic Analysis 9 (No. 1 2003): 203-82 (in Korean).
24. Pyo, Hak K. “Interdependency in East Asia and the Post-Crisis Macroeconomic Adjustment in Korea.” Seoul Journal of Economics 17 (No. 1 2004): 117-51.
25. Pyo, Hak K., and Ha, B. “A Test of Separability and Random Effects in Production Function with Decomposed IT Capital.” Forthcoming in Hitotsubashi Journal of Economics 48 (No. 1 2007).
26. Pyo, Hak K., Rhee, K. H., and Ha, B. Growth Accounting and Productivity Analysis by 33 Industrial Sectors in Korea (1984-2002). Paper Presented at Asia-Pacific Productivity Conference in Seoul, 2006.
27. Pyo, Hak K., Kong, B. H., Kwon, H. Y., and Kim, E. J. An Analysis of the Causes of Growth and Productivity by Industry for the Republic of Korea, 1970-1990. Seoul: Korean Economic Research Institute, 1992.
28. Sun, C., and Kalirajan, K. P. “Gauging the Sources of Growth of High-tech and Low-tech Industries: The Case of Korean Manufacturing.” Australian Economic Papers 44 (No. 2 2005): 170-85.
29. Timmer, M. P. Towards European Productivity Comparisons Using the KLEMS Approach - An Overview of Sources and Methods. Groningen Growth and Development Centre and The Conference Board, 2000.
30. Young, A. “The Tranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience.” Quarterly Journal of Economics 110 (No. 3 1995): 641-80.
31. Yuhn, K. H., and Kwon, J. K., “Economic Growth and Productivity: A Case Study of South Korea.” Applied Economics 32 (No. 1 2000): 13-23.
 

Editorial Office, Seoul Journal of Economics, Institute of Economic Research, Seoul National University 599 Gwanangno, Gwanak-gu, Seoul 151-746, Korea
Tel: +82-2-880-5434 | Fax: +82-2-888-4454 | E-mail: sje@plaza.snu.ac.kr
Copyright (c) 2020 SJE. All rights reserved.