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Total Factor Productivity of Korean Manufacturing Industries: Comparison of Competing Models with Firm-Level Data

  • Oh, Donghyun


    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Heshmati, Almas


    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Lööf, Hans


    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

This paper presents the parametric estimation of the rates of technical change and total factor productivity (TFP) growth of 7,462 Korean manufacturing firms for the period 1987 to 2007. Two alternative formulations of technical change measured by the time trend and the general index approaches are estimated with panel data models assuming flexible functional forms. Several extensions of each approach are also considered and their benefits and limitations are discussed. In addition to making estimates of the TFP growth and its decomposition, the paper compares the parametric TFP growth measure with the non-parametric Solow residual serving as a benchmark. Several hypotheses related to technology level, firm sizes, industrial sectors, skill biased technological change and macroeconomic and industrial policies are tested to explain the growth patterns and heterogeneity in technical change, input biases and TFP growth rates. Using second regression analysis, the paper explores the determinants of TFP growth and their policy implications.

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Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 201.

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Length: 30 pages
Date of creation: 12 Oct 2009
Date of revision:
Handle: RePEc:hhs:cesisp:0201
Contact details of provider: Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
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