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Total Factor Productivity by 72 Industries in Korea and International Comparison

Economic Research Institute (+82-2-759-5407) 2008.02.27 901

As Krugman (1994), Young (1994), and Lau and Kim (1994)’s studies showed,   the East Asian economic

miracle may be characterized as ‘input-led’ growth. However, both the stagnation in investment and the

decrease in average working hours and the fertility rate require a productivity surge for a renewed

sustainable growth in East Asia. The purpose of our study is to identify the sources of economic growth

based on a KLEMS model for the Republic of Korea, which experienced a financial crisis in 1997 after

joining OECD. We report estimates of inputs and gross output in Korea based on preliminary dataset of

72-industry classification following EU KLEMS project guidelines. We also provide estimates of 72

industry-level growth accounting and total factor productivity. We have found that Korea’s catch-up

process with industrial nations in its late industrialization has been predominantly input-led and

manufacturing based as documented in Timmer (1999) and Pyo (2001). However, since its financial crisis

in December 1997, the sources of growth seem to have switched to TFP-growth based. But lower

productivity in service industries seems to work against finding renewed sustainable growth path.

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