This study attempts to identify the internal causes of the growth of the Korean economy, estimating and analyzing the direct factors of growth, i.e., increasing inputs of production factors and factors of growing productivity. Applying the approach proposed by Edward F. Denison, this study identifies and analyzes the factors of economic growth on the production side, while also hinting at factors for long-term future economic growth by analyzing past data on Korea’s economic growth between 1970 and 1988.
The Korean economy grew at an astonishing rate of 9.3 percent a year from 1963 and 1979, and it continued to grow at an average rate of 8.4 percent a year from 1979 to 1988. The manufacturing sector, which led the growth, expanded thanks to the improved efficiency of each unit of capital investments made, not because of the increase in capital investments. During this period, the non-housing manufacturing sector kept growing rapidly at 9.47 percent a year, while the real gross national product (GNP) also grew at 8.25 percent a year from 1970 to 1988. The first reason behind such dramatic growth is the increase in every input invested in production, except education. The increases in inputs accounted for 35.1 percent of the economic growth Korea achieved during this period of time. The next factor of growth was the increase in the amount of capital investment, accounting for 20.8 percent of 20.8 percent of the economic growth. The third factor was the expansion of economies of scale, which contributed to 20 percent of the economic growth.
Almost 56 percent of the rise in the average economic growth rate from 1970 to 1988 is attributed to the increase in the amounts of inputs, such as labor and capital. This figure is considerably higher in Korea than it is in Japan and the United States, indicating, on the downside, the relative inefficiency of the other factors that were invested in Korea’s economic growth. However, all the factors that were put into economic growth in Korea during this time, except for education and technological progress, contributed to the economic growth on comparable levels to those in Japan and the United States. In other words, the fact that the increasing input of production factors contributed so much more to Korea’s economic growth than other factors attests to the uniqueness of Korea’s development experience.
한국경제의 요소생산성 성장요인추정(Identifying the factors of the growing productivity of production factors in the Korean economy)
|Series Title; No||정책연구시리즈 / 91-02|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||KDI; KDI School|