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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 31, No. 1, pp.21-61
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2018
Received 26 May 2017 Revised 21 Nov 2017 Accepted 28 Nov 2017

Productivity Analysis on the Service Sector in Korea: Evidence from Industry-Level and Firm-Level Data

Hak K. Pyo ; Keunhee Rhee
Hak K. Pyo, Corresponding author, Professor Emeritus, Department of Economics, Seoul National University, Address, Fax: 02-880-5432 hakkpyo@gmail.com
Keunhee Rhee, Visiting research fellow, Korea Labor Institute, #543 C Bldg., Sejong National Research Complex, 370, Sicheong-daero, Sejong-si, 30147, South Korea, Tel: 044-287-6402, Fax: 044-287-6797 ghlee@kli.re.kr

JEL Classification: D24, E22, O47

Abstract

One of the most dramatic characterizations of late industrialization is the speed and scope of structural transformation from manufacturing-based to service-based economy. This study aims to analyze this transformation in the Korean economy in terms of productivity performance in its service sector over the period of 1995–2013 in which the economy experienced two financial crises in the years 1997 and 2007. The major finding is that, while the growth rate of gross output in the service sector has decelerated more rapidly than in the manufacturing sector, the growth rate of total factor productivity (TFP) has improved from near 0% during 1996–2010 to 1.41% during 2011–2013. Particularly, the improvement in TFP in distribution and producer services has been impressive, which indicates that the Korean economy is transforming itself toward a service-oriented growth and that two financial crises have helped such transformation. However, the relative level of TFP in the service sector remains to be far behind than that of the US and Japan.

Keywords:

Labor productivity, Total factor productivity, Harberger Diagram

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