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Korean Augmented Production Function: The Role Of Services And Other Factors In Korea¡¯S Economic Growth Of Industries

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  • Elias Sanidas

    ()
    (Department of Economics, Seoul National University)

  • Hyeri Park

    (Department of Economics, Seoul National University)

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    Abstract

    It is well known that economic growth and services have a positive association. In particular, the more developed an economy is, the higher the share of the services sector. While most research has focused on service output, this study also examines services as input. Recently, the need for taking services a separate input in the production function has come to the fore. Therefore, the OECD productivity manual generalizes the KLEM model to KLEMS (capital-labor-energy-materials-services) model by including the services as an input. We use KLEMS data in this study. In addition, we augmented the standard production function with other variables such as the inventory to sales ratio, R&D to sales ratio, education expenditure to sales ratio, and the debt to sales ratio. The findings are encouraging and lead us to formulate some important conclusions; for example, after the 1998 Financial Crisis, the Korean economy has increased in efficiency and this is partly due to an increased importance of services as both output and input.

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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 36 (2011)
    Issue (Month): 1 (March)
    Pages: 59-85

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    Handle: RePEc:jed:journl:v:36:y:2011:i:1:p:59-85

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    Related research

    Keywords: Services; Manufacturing; Production Function; Korean Industries; Financial Crisis; Panel Data;

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    1. Irvine, F. Owen, 2003. "Long term trends in US inventory to sales ratios," International Journal of Production Economics, Elsevier, vol. 81(1), pages 27-39, January.
    2. Giulio Cainelli, 2008. "Spatial Agglomeration, Technological Innovations, and Firm Productivity: Evidence from Italian Industrial Districts," Growth and Change, Gatton College of Business and Economics, University of Kentucky, vol. 39(3), pages 414-435.
    3. Marvin B. Lieberman & Lieven Demeester, 1999. "Inventory Reduction and Productivity Growth: Linkages in the Japanese Automotive Industry," Management Science, INFORMS, vol. 45(4), pages 466-485, April.
    4. Kolleen Rask & Kevin Rask, 1994. "The Central Role of Services in Economic Development: Externalities, Growth, and Public Policy," Working Papers 9406, College of the Holy Cross, Department of Economics.
    5. Jungsoo Park & Hang Ryu, 2006. "Accumulation, Technical Progress, and Increasing Returns in the Economic Growth of East Asia," Journal of Productivity Analysis, Springer, vol. 25(3), pages 243-255, 06.
    6. Victor R. Fuchs, 1968. "The Service Economy," NBER Books, National Bureau of Economic Research, Inc, number fuch68-1.
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