XML

Seoul Journal of Economics - Vol. 21 , No. 1
[Paper List] [Go to Volume List]

[ Article ]
Seoul Journal of Economics - Vol. 21, No. 1, pp. 93-139
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 29 Feb 2008
Received 09 Oct 2007 Revised 11 Feb 2008

Total Factor Productivity of the Korean Firms and Catching up with the Japanese Firms
Moosup Jung ; Keun Lee ; Kyoji Fukao
Doctor, Department of Economics, Seoul National University, Seoul 151-746, Korea (econ@snu.ac.kr)
Professor, Department of Economics, Seoul National University, Seoul 151-746, Korea, Tel: +82-2-880-6367 (kenneth@snu.ac.kr)
Professor, Institute of Economic Research, Hitotsubashi University, Japan (k.fukao@srv.cc.hit-u.ac.jp)

JEL Classification: D24, L25, O53, O57

Abstract

This paper measured the Total Factor Productivity (TFP) of all listed firms in Korea from 1984 to 2005 and compared this TFP of Korean firms with that of Japanese firms. This study used the chain-linked index number method developed by Good et al. (1999) to find that the average TFP of Korean firms grew about 44.1% between 1984 and 2005, with 2.1% annual growth rates. The catch-up index of Korean firms with Japanese firms is defined at an individual firm level for the first time among existing literature. Through this comparison analysis, the researchers found that there were four patterns of catching up methods practiced by Korean firms in closing in on the Japanese firms. These patterns were over catch-up, just catchup, under catch-up, and reverse catch-up.” Furthermore, the researchers found that the number of under catch-up and reverse catch-up industries was more than 40% of the firms subjected in the study. In contrast, only 10.1% of all the Korean listed firms and 8.7% of total sales of all the listed firms surpassed Japanese firms in terms of TFP in 2004. Also, the catch-up performance was quite better in bigger firms, which is indicative of polarization in TFP catch-up performance.

Keywords: Catch-up, Productivity, Korea, Japan, Polorization
Acknowledgments

This is the revised version of the paper which was presented at the 2007 Seoul Journal of Economics International Symposium, held in Seoul. This study uses the international database developed by the international research team led by Kyoji Fukao, jointly sponsored by the Hitotsubashi University, Nihon University, and Seoul National University.

References
1. Ahn, Sanghoon. “Spillovers of Learning by Exporting and Productivity Growth: Evidence from Korean Manufacturing Micro Data.” Journal of Korean Economic Analysis 11 (2005): 75-131 (in Korean).
2. Ahn, Sanghoon. Internationalization of Production and Change of Productivity: Evidence from Micro Data and International Comparison. KDI Research Report 2006-5, 2006 (in Korean).
3. Ahn, S. H., Fukao, K., and Kwon, H. U. “The Internationalization and Performance of Korean and Japanese Firms: An Empirical Analysis Based on Micro-data.” Seoul Journal of Economics 17 (No. 4 2004): 439-82.
4. Aigner, D. J., and Chu, S. F. “On Estimating the Industry Production Function.” The American Economic Review 58 (No. 4 1968): 826-39.
5. Aigner, D., Lovell, C. K., and Schmidt, P. “Formulation and Estimation of Stochastic Frontier Production Function Models.” Journal of Econometrics 6 (No. 1 1977): 21-37.
6. Aw, Bee Yan, Chen, Xiaomin, and Roberts, Mark J. “Firm-level Evidence on Productivity Differentials and Turnover in Taiwanese Manufacturing.” Journal of Development Economics 66 (No. 1 2001): 55-86.
7. Aw, Bee Yan, Chung, Sukkyun, and Roberts, M. J. “Productivity and Turnover in the Export Market: Micro Evidence from Taiwan and South Korea.” World Bank Economic Review 14 (No. 1 2000): 65-90.
8. Aw, Bee Yan, Chung, Sukkyun, and Roberts, M. J. “Productivity, Output, and Failure: A Comparison of Taiwanese and Korean Manufacturers.” The Economic Journal 113 (November 2003): 485-510.
9. Bartelsman, Eric J., and Doms, Mark. “Understanding Productivity: Lessons from Longitudinal Microdata.” Journal of Economic Literature 38 (No. 3 2000): 569-94.
10. Biesebroeck, Johannes Van. The Sensitivity of Productivity Estimates: Revisiting Three Important Debates. NBER Working Paper No. W10065, 2003.
11. Biesebroeck, Johannes Van. Robustness of Productivity Estimates. NBER Working Paper No. W10303, 2004.
12. Blundell, R. W., and Bond, S. R. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.” Journal of Econometrics 87 (No. 1 1998): 115-43.
13. Blundell, R. W., and Bond, S. R. “GMM Estimation with Persistent Panel Data: An Application to Production Functions.” Econometric Reviews 19 (No. 3 2000): 321-40.
14. Caves, D. W., Christensen, L. R., and Diewert, E. W. “Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers.” The Economic Journal 92 (No. 365 1982): 73-86.
15. Charnes, A., Cooper, W. W., and Rhodes, E. “Measuring the Effciency of Decision Making Units.” European Journal of Operational Research 2 (No. 6 1978): 429-44.
16. Chen, Edward K. Y. “Factor Inputs, Total Factor Productivity, and Economic Growth: The Asian Case.” The Developing Economics XV (1977): 121-43.
17. Chen, Edward K. Y. “The Total Factor Productivity Debate: Determinants of Economic Growth in East Asia.” Asian Pacific Economic Literature 11 (1997): 18-38.
18. Christensen, L. R., and Cummings, D. Real Product, Real Factor Input, and Total Factor Productivity in the Republic of Korea, 1960-1973. Discussion Paper No. 7507, Social Systems Research Institute, University of Wisconsin, Madison, WI, 1975.
19. Christensen, L. R., and Cummings, D. “Real Product, Real Factor Input, and Productivity in the Republic of Korea, 1960-1973.” Journal of Development Economics 8 (No. 3 1981): 285-302.
20. Christsnsen, L. R., Cummings, D., and Jorgenson, D. W. “Economic Growth 1947-1973: An International Comparison.” In J. W. Kendrick and B. N. Vaccara (eds.), New Developments in Productivity Measurement and Analysis. Chicago, IL: University of Chicago Press, 1980.
21. Copeland, Morris A. “Concepts of National Income.” Studies in Income and Wealth. Vol. I, New York: NBER, pp. 3-63, 1937.
22. Cornwell, C., Schmidt, P., and Sickles, R. C. “Productivity Frontiers with Cross-sectional and Time Series Variation in Effciency Levels.” Journal of Econometrics 46 (Nos. 1-2 1990): 185-200.
23. Diewert, W. Eerwin “Exact and Superlative Index Numbers.” Journal of Econometrics 4 (No. 2 1976): 115-45.
24. Dollar, D., and Sokoloff, K. “Patterns of Productivity Growth in South Korean Manufacturing Industries, 1963-79.” Journal of Development Economics 33 (No. 2 1990): 309-27.
25. Farrell, M. J. “The Measurement of Productive Efficiency.” Journal of the Royal Statistical Society, Series A. 120 (No. 3 1957): 253-90.
26. Fukao, Kyoji, Lee, Keun, Inui, T., Liu, D., Kwon, K. H., Yuan, T., Kim, Y., Jung, Moosup, Kabe, S., and Takeuchi, F. Database of the TFP of the Firm of Japan, China, and Korea. Research Report, Japan Center for Economic Research, 2007a (in Japanese, partly in English).
27. Fukao, Kyoji, Inui, T., Kwon, H., Yuan, T., Kim, Y., Jung, Moosup. “The Methodology of Measuring TFP and International Comparison of TFP.” Chapter 2, in Database of the TFP of the Firm of Japan, China, and Korea. Research Report, Japan Center for Economic Research 2007b (in Japanese).
28. Fukao, K., Miyagawa, Tsutomu, Kawai, Hiroki, Inui, Tomohiko, Yue, Ximing, Okumoto, Yoshinobu, Nakamura, Masakatu, Hayashida, Masahide, Nakata, Kazuyoshi, Hashikawa, Kensho, Okumura, Naoki, Murakami, Yukako, Hamagata, Sumio, Yoshizawa, Yuuki, Maruyama, Shiko, and Yamauchi, Chikako. “Sectoral Productivity and Economic Growth in Japan: 1970-98.” Economic Analysis 170, The Economic and Social Research Institute (ESRI), 2003 (in Japanese).
29. Good, D. H., Nadiri, M. I., and Sickles, R. C. “Index Number and Factor Demand Approaches to the Estimation of Productivity.” In H. Pesaran and P. Schmidt (eds.), Handbook of Applied Econometrics: Microeconomics, Oxford: Blackwell Publisher, Vol. II, pp. 14-80, 1999.
30. Griliches, Zvi. “The Discovery of the Residual: A Historical Note.” Journal of Economic Literature 34 (No. 3 1996): 1324-30.
31. Hahn, C. H. Entry, Exit and Aggregate Productivity Growth: Micro Evidence on Korean Manufacturing. OECD Economics Department Working Papers 272, 2000.
32. Hahn, C. H. Exporting and Performance of Plants: Evidence from Korean Manufacturing. NBER Working Paper 10208, 2004.
33. Hayashi, F., and Inoue, Tohru. “The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms.” Econometrica 59 (No. 3 1991): 731-53.
34. Hulten, Charles R. Total Factor Productivity: A Short Biography. NBER Working Paper 7471, 2000.
35. Jorgensen, Dale W. “Capital Theory and Investment Behavior.” The American Economic Review 53 (No. 2 1963): 247-59.
36. Kendrick, J. W. “Productivity.” In Solomon Fabricant (ed.), Government in Economic Life. 35th Annual Report, New York: NBER, pp. 44-7, 1955.
37. Kim, Chan Su. Firm Dynamics and Productivity in Korean Manufacturing. Ph. D. Dissertation, Seoul National University, 2006 (in Korean).
38. Kim, Jin su, Park, H., and Ahn, J. Corporate Tax Rate Policy: Recent Trends and Its Economic Effects. Report in Korea Institute of Public Finance. 2003 (in Korean).
39. Kim, Jong-il, and Lau, Lawrence. J. “The Sources of Economic Growth in the East Asia Newly Industrialized Countries.” Journal of the Japanese and International Economics 8 (1994): 235-71.
40. Kim, Kwang Suk, and Park, Joon-kyung. Sources of Economic Growth in Korea: 1963-1982. Seoul, Korea: Korea Development Institute, 1985.
41. Kim, Kwang Suk, and Roemer, Michael. “Growth and Structural Transformation.” Studies in the Modernization of the Republic of Korea: 1945-1975. Cambridge, Massachusetts: Harvard University Press, 1979.
42. Kim, Young Chin, and Kwon, Jene K. “The Utilization of Capital and the Growth of Output in a Developing Economy: The Case of South Korean Manufacturing.” Journal of Development Economics 4 (No. 3 1977): 265-78.
43. Korea Productivity Center. Total Factor Productivity Analysis of Listed Firms. Research Report, 2002 (in Korean).
44. Korea Productivity Center. Total Factor Productivity Analysis of Mannufacturing Industries. Research Report, 2005 (in Korean).
45. Korea Productivity Center. Firm Level Relative Total Factor Productivity Analysis. Research Report, 2006 (in Korean).
46. Krugman, Paul. “The Myth of Asia’s Miracle.” Foreign Affairs 73 (No. 6 1994): 61-74.
47. Kwack, Sung Yeung. Knowledge Capital and Export Growth in Korean Manufacturing Industries. KIET (Korea Institute for Industrial Economics and Trade) Occasional Paper No. 65, 2007.
48. Kwon, Jene K. “Capital Utilization, Economies of Scale and Technical Change in the Growth of Total Factor Productivity: An Explanation of South Korean Manufacturing Growth.” Journal of Development Economics 24 (No. 1 1986): 75-89.
49. Lee, Kyu Sik. The Bruno Production Function, Factor Market Disequilibrium, and Factor Contributions to Growth in the Korea Industrial Sectors. KDT WP7208, Korea Development Institute, 1972.
50. Levinsohn, James, and Petrin, Amil. “Estimating Production Functions Using Inputs to Control for Unobservables.” The Review of Economic Studies 70 (No. 2 2003): 317-41.
51. Meeusen, W., and van den Broeck, J. “Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error.” International Economic Review 18 (No. 2 1977): 435-44.
52. Moon, Hee-Wha, Jo, Byung-Tahk, Whang, Ihn-Ho, and Kim, Kyung-Buhm. Total Factor Productivity in Korea: An Analysis of 27 Mannufacturing Industries. Seoul: Korea Productivity Center, 1991.
53. Motohashi, K. Assessing Japan's Competitiveness by International Productivity Level Comparison with China, Korea, Taiwan, and United States, RIETI Discussion Paper, 2006.
54. Nadiri, M. Ishaq. “Some Approaches to the Theory and Measurement of Total Factor Productivity: A Survey.” Journal of Economic Literature 8 (No. 4 1970): 1137-77.
55. Nadiri, M. Ishaq. “International Studies of Factor Inputs and Total Factor Productivity: A Brief Survey.” Review of Income and Wealth 18 (No. ? 1972): 129-54.
56. Nelson, Richard. “Research on Productivity Growth and Productivity Differences: Dead Ends and New Departures.” Journal of Economic Literature 19 (No. 3 1981): 1029-64.
57. Oh, I., Heshmati, A., Baek, C. and Lee, J. Comparative Analysis of Firm Dynamics by Size: Korean Manufacturing. Ratio Working Papers No. 94, 2006.
58. Olley, G. Steven, and Pakes, Ariel. “The Dynamics of Productivity in the Telecommunications Equipment Industry.” Econometrica 64 (No. 6 1996): 1263-97.
59. Pyo, Hak K. “Economic Growth in Korea (1911-1999): A Long-term Trend and Perspective.” Seoul Journal of Economics 14 (No. 1 2001): 59-125.
60. Pyo, Hak K. “Estimates of Capital Stocks by Industries and Types of Assets in Korea (1953-2000).” Mimeograph, Institute of Economic Research, Seoul National University, 2002.
61. Pyo, Hak K., Kong, Byung-Ho, Kwon, Ho-Young, and Kim, Eun-Ja. An Analysis of the Causes of Growth and Productivity by Industry for Republic of Korea, 1970-1990. Seoul: Korea Economic Research Institute, 1993.
62. Pyo, Hak K., and Kwon, Ho-Young. “Estimation of Real Factor Input and Factor Productivity in the Korean Private Sector.” Korean Economic Journal 30 (1991): 147-94 (in Korean).
63. Pyo, Hak K., Rhee, Keun-Hee, and Ha, Bongchan. Growth Accounting and Productivity Analysis by 33 Industrial Sectors in Korea (1984-2002). Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University, 2006.
64. Rodrik, D. “Getting Interventions Right: How South Korea and Taiwan Grew Rich.” Economic Policy 10 (1995): 54-107.
65. Schmidt, P. and Sickles, L. “Production Frontiers and Panel Data.” Journal of Business and Economic Statistics 2 (No. 4 1984): 367-74.
66. Schreyer, P. International Comparison of Levels of Capital Input and Productivity. OECD/Ivie/BBVA Workshop on Productivity Measurement, 17-19 October 2005, Madrid, Mimeograph, 2005.
67. Solow, Robert M. “Technical Change and the Aggregate Production Function.” The Review of Economics and Statistics 39 (No. 3 1957): 312-20.
68. Tinbergen, Jan. “Econometrie.” Gorinchem: J. Noorduijn en zoon n. v. 1941 (in German).
69. World Bank. World Development Report: The Challenge of Development. New York: Oxford University Press, 1991.
70. World Bank. The East Asian Miracle. Economic Growth and Public Policy. New York: Oxford University Press, 1993.
71. Young, A. “Lessons from the East Asian NICs: A Contrarian View.” European Economic Review 38 (Nos. 3-4 1994): 964-73.
72. Young, A. “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience.” Quarterly Journal of Economics 110 (No. 3 1995): 641-80.
 

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.