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

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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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    1. Kyoji Fukao & Tsutomu Miyagawa & Miho Takizawa, 2007. "Productivity Growth and Resource Reallocation in Japan," Hi-Stat Discussion Paper Series d07-224, Institute of Economic Research, Hitotsubashi University.
    2. Kyoji Fukao & Young Gak Kim & Hyeog Ug Kwon, 2006. "Plant Turnover and TFP Dynamics in Japanese Manufacturing," Hi-Stat Discussion Paper Series d06-180, Institute of Economic Research, Hitotsubashi University.
    3. Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
    4. Berndt, Ernst R & Christensen, Laurits R, 1974. "Testing for the Existence of a Consistent Aggregate Index of Labor Inputs," American Economic Review, American Economic Association, vol. 64(3), pages 391-404, June.
    5. Pyo, Hak K. & Ha, Bongchan, 2007. "A Test of Separability and Random Effects in Production Function with Decomposed IT Capital," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 48(1), pages 67-81, June.
    6. Berndt, Ernst R. & Christensen, Laurits R., 1973. "The translog function and the substitution of equipment, structures, and labor in U.S. manufacturing 1929-68," Journal of Econometrics, Elsevier, vol. 1(1), pages 81-113, March.
    7. Denny, Michael & Fuss, Melvyn A, 1977. "The Use of Approximation Analysis to Test for Separability and the Existence of Consistent Aggregates," American Economic Review, American Economic Association, vol. 67(3), pages 404-418, June.
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    Cited by:

    1. ., 2013. "Japan's Alternating Phases of Growth and Future Outlook," Chapters,in: 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, 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 for the Study of Labor (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. 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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