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Productivity and exports in Korea : Comparisons with China and Japan

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Frame of Image tion network expanded, global trade increased remarkably, and at the same time the three countries’ exports also witnessed a great surge by virtue of a clear division of labor among the three countries. However, situations have changed since the early 2000s. As China advanced technologically, China’s rush into the global market became a serious threat to Japan, and even more so to Korea. For example, it is evident from China’s surge and Japan’s fall in the global electronics market in terms of market share since the mid-2000s (see Figure 1). More recently, the global economic recession together with trade slowdown has led to more intense competition among the three countries.
and estimates the effect of relative productivity on exports in Korea.
Figure 1. C-J-K’s share (%) in the global electronics market
Source: UN COMTRADE.
Measuring Productivity Total factor productivity (TFP) is obtained by
estimating the following logarithmic production function: , where y, l, and k indicate output, labor, and capital stock in year t in industry i of country c, respectively. ω is a productivity shock observed by producers, but not by econometricians, which implies a potential source of en-
This article aims to assess Korea’s competitiveness in manufacturing exports, focusing on the rivalry among the three countries. To this end, we examine the productivities of C-J-K
October 25, 2016
dogeneity. The Olley and Pakes (1996)’ method is applied to address this issue. The data for estimating T


Full Text
Title Productivity and exports in Korea
Similar Titles
Sub Title

Comparisons with China and Japan

Material Type Reports
Author(English)

Bae, Chankwon

Publisher

Sejong, South Korea:Korea Institute For International Economic Policy

Date 2016-10
Series Title; No World Economy Brief
Pages 5
Subject Country China(Asia and Pacific)
Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Trade
Industry and Technology < General
Holding Korea Institute For International Economic Policy
License

Abstract

This article aims to assess Korea's competitiveness in manufacturing exports, focusing on the rivalry among the three countries. To this end, we examine the productivities of C-J-K and estimates the effect of relative productivity on exports in Korea. It finds that first, China has drastically caught up with Korea since 2000, while there still exists a relatively large productivity gap between Japan and Korea. This is reminiscent of the sandwich theory, meaning that Korea is literally sandwiched between a fast-growing China and a technologically advanced Japan. Second, technical efficiency, an important determinant of productivity, has improved rapidly and steadily in China during the 2000s, while it has declined in Korea and Japan since the global financial crisis. Third, there seems to be a positive link between productivity and exports in Korea. In particular, a relative increase in productivity to China and Japan is highly related to its export performance. Not only technological progress, but also the enhancement of production efficiency is important for boosting export volumes and global market share.