Key Features and Implications of Productivity Changes in Korea after COVID-19 [BOK Issue Note 2023-3]

BOK Issue Note
한국의 생산성 변화 코로나19 이후 디지털화 구조적 개혁 기술적 혁신
Research Department(02-880-4291)

  The heightened uncertainty in the macro economy after the pandemic crisis is raising concerns about long-term secular stagnation, which could weaken the fundamental economic strength, such as productivity. This paper examines the key features of productivity changes in Korea during the pandemic period and identifies long-term productivity paths according to structural changes that will unfold after the pandemic, and derives policy implications for enhancing productivity.

  According to the analysis, labor productivity(based on hours worked) in Korea showed a boom-then-bust cycle, briefly rebounding at the onset of the pandemic before stagnating. The long-term trend of productivity appears to have slightly declined compared to before the pandemic, as persistent external uncertainties, the elimination of the reallocation effect between industries, and the absence of the cleansing effect of recessions have all influenced productivity. Moreover, the pandemic shock has widened the productivity gap in the service industry depending on the level of digital adoption. The digital-intensive service sector showed a significant increase in labor productivity during the pandemic period, even without a recovery in labor input.

  The long-term outlook on productivity would depend on whether structural weaknesses are augmented or offset by the changes brought about by the crisis. The delay in structural reform and the scarring effect, as well as the acceleration of digital transformation, are expected to influence the long-term productivity trend through changes in the efficiency of the entire production process and the path of technological innovation. Estimation results show that Korea lags behind major countries in terms of production efficiency, indicating that it may be difficult to expect significant productivity improvements after the pandemic through efforts to promote technological innovation such as R&D investment alone. Therefore, we suggest a two-track strategy of supporting an economic environment conducive to competitiveness and the rapid advancement of new industries through innovation, while also removing inefficient barriers to market efficiency through corporate restructuring and deregulation.

내가 본 콘텐츠