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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 20, No. 1, pp.23-58
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

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.

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