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The productivity dispersion of the Korean manufacturing industry and macroeconomic allocation efficiency measures

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Frame of Image The Productivity Dispersion of the Korean Manufacturing Industry and Macroeconomic Allocation Efficiency Measures
By JONGIL KIM,DONGKEUN KANG* According to the macroeconomic allocation efficiency measure, particularly based on the methodology of Hsieh and Klenow (2009), Korea’s allocation efficiency in the manufacturing industry deteriorated in the 2000s compared to that in the 1990s. This study compares the potential TFP gain when resource allocation is removed, an indicator of allocation inefficiency according to Hsieh and Klenow (2009), and the productivity dispersion in the Korean manufacturing industry. It finds that the TFP gain may be better explained by TFP dispersions rather than proxies related to factors of distortion. The findings imply that we should investigate the sources of TFP dispersion rather than the sources of distortion to explain increases in the TFP gain (or TFP loss), which is considered as allocation inefficiency in the literature. Key Word: Misallocation, Total Factor Productivity (TFP), Productivity Dispersion JEL Code: O11, D24
I. Introduction
I
d entifying the sources of productivity differences across countries has been an essential subject in studies of economic growth. Recently, numerous theoretical and empirical studies have been devoted to increasing our understanding of differences in productivity levels across countries by exploring the effects of the misallocation of resources on aggregate economic performance, particularly the total fact


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Title The productivity dispersion of the Korean manufacturing industry and macroeconomic allocation efficiency measures
Similar Titles
Material Type Articles
Author(English)

Kim, Jongil; Kang, Dongkeun

Publisher

[Sejong, South Korea]:Korean Development Institute

Date 2015
Journal Title; Vol./Issue KDI Journal of Economic Policy:vol. 37(no. 3)
Pages 25
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Industry and Technology < Manufacturing
Holding Korean Development Institute; KDI School

Abstract

According to the macroeconomic allocation efficiency measure, particularly based on the methodology of Hsieh and Klenow (2009), Korea’s allocation efficiency in the manufacturing industry deteriorated in the 2000s compared to that in the 1990s. This study compares the potential TFP gain when resource allocation is removed, an indicator of allocation inefficiency according to Hsieh and Klenow (2009), and the productivity dispersion in the Korean manufacturing industry. It finds that the TFP gain may be better explained by TFP dispersions rather than proxies related to factors of distortion. The findings imply that we should investigate the sources of TFP dispersion rather than the sources of distortion to explain increases in the TFP gain (or TFP loss), which is considered as allocation inefficiency in the literature.