The purpose of this study is to account for Korea’s economic growth by sector and to compare its growth to the experiences of developed countries.
The Korean economy has undergone rapid changes in its industrial structure. The agriculture, forestry and fishing sector, which used to constitute Korea’s primary industry, has declined rapidly, while the service sector has quickly expanded. The manufacturing sector witnessed continued growth until the 1980s owing to Korea’s export-led growth strategy. Following a period of decline, manufacturing began expanding again since the economic crisis in the late 1990s. When considering how rapid changes in the industrial structure have implications for change in growth over time and across sectors, accounting for economic growth by sector will assist in understanding and forecasting the growth pattern of the entire economy and establishing a growth strategy.
This study analyzes sector growth factors from the supply side for the period 1975-2000. The average annual growth rate of the Korean economy was estimated at 7.04%, to which the contributions of the increase in the number of workers is 1.39%p, capital stock 3.37%p, and TFP 2.29%p. The contribution of TFP in this study is higher than that in other studies because the contribution of human capital is included in the contribution of TFP. The contribution of labor input decreased over the decades, while that of capital stock remained constant. The contribution of TFP peaked at 3.28%p in the 1980s but decreased to 2.29%p in the 1990s. Of the 29 sectors considered in this study, textile and apparel showed significant negative growth due to a significant decrease in labor input. Electric and electronic products and communications, on the other hand, contributed the most to TFP enhancement.
Results showed that the growth rates of the Korean economy were the highest among the 15 countries, recording 8.29% in the 1980s and 5.97% in the 1990s compared to 2~3.5% for the other 14 countries. Australia and the U.S. achieved relatively high growth rates of more than 3% in both decades, while Italy, Denmark and Sweden marked just more than 2% economic growth. The growth rates of Korea, France, Finland, and Italy decreased over the decades, while those of Norway, the Netherlands and Denmark increased. In the 1980s, the contributions of labor, capital and TFP were all the highest in the 15 countries, which implies that the rapid economic growth of Korea in the 1980s was the result of a rapid increase both in factor input and in TFP. In the 1990s, however, the average annual growth rate significantly declined from 8.3% to 6.0% due to the decrease in the contribution of labor from 1.6%p to 0.9%p, and in TFP from 3.3%p to 1.7%p. In many developed countries, on the other hand, the contribution of TFP increased. For example, Finland and Norway achieved around 2.5% TFP growth, and Australia, Canada and the U.S. also achieved TFP growth rates that were significantly higher than that of Korea. This implies that the increase in the capital stock played a major role in Korea’s economic growth in the 1990s.
In Korea, the manufacturing sector showed higher growth rates than not only other sectors in Korea, but also other countries, recording 10.6% in the 1980s and 8.0% in the 1990s. This was made possible by the rapid increase in the contributions of both production factors and TFP. It should be said, on the other hand, that the contribution of TFP increased in other countries, including Finland (5.0%p), Canada (3.1%p) and the U.S (3.0%p).
The growth rate of Korea’s service sector turned out to be the lowest among the 15 countries, recording 7.8% in the 1980s and 5.8% in the 1990s. In addition, the growth of Korea’s service sector was made possible mostly by the increase in factor input. Although the contribution of TFP growth was small, the growth of other countries’ service sectors effectively increased the contribution of TFP.
산업부문별 성장요인 분석 및 국제비교(Accounting for economic growth by sector and international comparison)
|Series Title; No||정책포럼 / 2004-07|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < General|
|Holding||KDI; KDI School|