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The Stochastic Model of Technical Change and Profit Rates: Korean Economy (Manufacturing Sector: 1970–2015)

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  • Deokmin Kim

Abstract

This article aims to reconstruct major macroeconomic variables, including the profit rate in the Korean economy, by using the stochastic model of technical change. This model needs no a priori technological patterns concerning available technologies, such as the neoclassical production function or fixed coefficient technologies. This article provides a summary of the rate of profit, the productivity of capital, and labor productivity in the Korean manufacturing sector between 1970 and 2015. A multiple structural break model detects possible regime changes in the growth rate of each type of productivity. The innovation sets for the simulation are created based on this test. Furthermore, the article reconstructs the rate of profit, the productivity of capital, and labor productivity in Korea’s manufacturing sector and discusses a catching-up process by Korea with the United States, which the model reproduces. JEL Classification : E11, E17, O14, O33

Suggested Citation

  • Deokmin Kim, 2023. "The Stochastic Model of Technical Change and Profit Rates: Korean Economy (Manufacturing Sector: 1970–2015)," Review of Radical Political Economics, Union for Radical Political Economics, vol. 55(2), pages 290-308, June.
    • Handle: RePEc:sae:reorpe:v:55:y:2023:i:2:p:290-308
    DOI: 10.1177/04866134221118954
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    References listed on IDEAS

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    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
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    3. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    4. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
    5. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720.
    6. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
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    More about this item

    Keywords

    labor productivity; Korean economy; rate of profit; capital productivity; stochastic model of technical change;
    All these keywords.

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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