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Estimates of Multifactor Productivity, ICT Contributions and Resource Reallocation Effects in Japan and Korea

Author

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  • FUKAO Kyoji
  • MIYAGAWA Tsutomu
  • Hak K. PYO
  • Keun Hee RHEE

Abstract

As the studies of Krugman (1994), Young (1994), and Lau and Kim (1994) 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 combined with a decrease in the fertility rate require a productivity surge for 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 Japan and the Republic of Korea, which experienced a 'Lost Decade' and a financial crisis in 1997-1998, respectively. We report estimates of multifactor productivity in the market economy of Japan and Korea based on the dataset of a 72-industry classification following EU KLEMS project guidelines. We also identify the contributions of ICT assets and resource reallocations in two economies. Both economies have strong ICT-producing sectors but relatively weaker ICT-usage effects. Lower productivity in service industries due to excessive regulations and lack of competition in public service sectors seem to have worked against enhancing ICT-usage effects and finding renewed sustainable growth paths. The resource reallocation effects of capital input in both Japan and Korea were either negligible or insignificant, while those of labor input (the labor shift from lower wage industries to higher wage industries) were positive and significant. Therefore, a series of productivity-enhancing policies designed to promote reallocation of capital input seems crucial for both economies to resume sustainable growth paths.

Suggested Citation

  • FUKAO Kyoji & MIYAGAWA Tsutomu & Hak K. PYO & Keun Hee RHEE, 2009. "Estimates of Multifactor Productivity, ICT Contributions and Resource Reallocation Effects in Japan and Korea," Discussion papers 09021, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:09021
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    References listed on IDEAS

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    Cited by:

    1. ., 2013. "Japan's Alternating Phases of Growth and Future Outlook," Chapters, in: D. S.P. Rao & Bart van Ark (ed.), World Economic Performance, chapter 6, pages 136-161, Edward Elgar Publishing.
    2. Harry X. WU & David T. LIANG, 2017. "Accounting for the Role of Information and Communication Technology in China's Productivity Growth," Discussion papers 17111, Research Institute of Economy, Trade and Industry (RIETI).
    3. Ceccobelli, M. & Gitto, S. & Mancuso, P., 2012. "ICT capital and labour productivity growth: A non-parametric analysis of 14 OECD countries," Telecommunications Policy, Elsevier, vol. 36(4), pages 282-292.
    4. Khayyat, Nabaz T. & Heshmati, Almas, 2014. "Production Risk, Energy Use Efficiency and Productivity of Korean Industries," Working Paper Series in Economics and Institutions of Innovation 359, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    5. Khayyat, Nabaz T. & Lee, Jongsu & Heshmati, Almas, 2014. "How ICT Investment and Energy Use Influence the Productivity of Korean Industries," IZA Discussion Papers 8080, Institute of Labor Economics (IZA).
    6. Tsutomu Miyagawa & Shoichi Hisa, 2013. "Measurement of Intangible Investment by Industry and Economic Growth in Japan," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(2), pages 405-432, March.
    7. Kosuke Aoki & Naoko Hara & Maiko Koga, 2017. "Structural Reforms, Innovation and Economic Growth," Bank of Japan Working Paper Series 17-E-2, Bank of Japan.
    8. Mostafa SALIMIFAR & Mehdi BEHNAME, 2013. "Information Technology And Productivity Growth In Islamic Countries," Romanian Journal of Economics, Institute of National Economy, vol. 36(1(45)), pages 128-135, June.
    9. David, Tao Liang & Harry, X Wu & Fukao, Kyoji, 2022. "Estimation of China's investment in ICT assets and accumulated ICT capital stock," IDE Discussion Papers 833, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    10. Hyunbae CHUN & MIYAGAWA Tsutomu & Hak Kil PYO & TONOGI Konomi, 2015. "Do Intangibles Contribute to Productivity Growth in East Asian Countries? Evidence from Japan and Korea," Discussion papers 15055, Research Institute of Economy, Trade and Industry (RIETI).

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