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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 12, No. 2, pp.127-141
ISSN: 1225-0279 (Print)
Print publication date 31 May 1999
Received Sep 1998 Revised Apr 1999

Finance, Production Efficiency, and Growth: Evidence from the Korean Manufacturing Industries

Jaewoon Koo ; Sangho Kim
Department of Economics, Chonnam National University, Korea, Tel: +82-62-530-1551, Fax: +82-62-530-1559 jwkoo@chonnam.chonnam.ac.kr
College of Business, Honnam University, Korea

JEL classification: C23, C24, O10, O18

Abstract

Numerous studies have focused on the development of financial market as a driving force in economic growth. We find that the provision of financial services enhances production efficiency, and thereby promotes economic growth. Applying the stochastic frontier production function approach to the panel data of the Korean regional manufacturing industries, we show that an increase in financial services is associated with the reduction in technical inefficiency. It implies that the supply of financial services is essential to economic growth.

Acknowledgments

Jaewoon Koo wishes to acknowledge the financial support of Chonnam National University for this research in the program year of 1995. We thank an anonymous referee for valuable comments.

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