IDEAS home Printed from https://ideas.repec.org/p/hst/ghsdps/gd10-177.html
   My bibliography  Save this paper

Estimates of Total Factor Productivity, the Contribution of ICT, and Resource Reallocation Effects in Japan and Korea

Author

Listed:
  • Kyoji Fukao
  • Tsutomu Miyagawa
  • Hak K. Pyo
  • Keun Hee Rhee

Abstract

The purpose of our study is to identify the sources of economic growth based on a KLEMS model for Japan and Korea. We also identify the growth contribution of ICT assets and resource reallocation effects in the two economies. Both Japan and Korea enjoyed high TFP growth in ICT-producing sectors but suffered low TFP growth in ICT-using sectors. For Japan, we find that the main factor underlying the Lost Decade is the slow-down in TFP growth. We also found that Korea's TFP growth was slow until the Asian financial crisis of 1997-1999 but then accelerated after the crisis. It seems that before the crisis, Korea was following a catch-up process with developed economies that was predominantly input-led and manufacturing-based, as documented by Timmer (1999) and Pyo (2001). However, through the drastic economic reform undertaken during the crisis, Korea seems to have shifted to a new phase of economic growth since the end of the 1990s. TFP growth rates, especially those in manufacturing sectors, have substantially increased in post-crisis Korea. Both in Japan and Korea, productivity in service sectors is much lower than in manufacturing. The reason probably is excessive regulation and a lack of competition in service sectors. And these factors seem to have impeded introduction of ICT in service industries. As for ICT capital accumulation, the ICT investment/GDP ratio of Korea is higher than that of Japan. Especially, the speed of ICT accumulation in the ICT sector in Korea is much faster than that in Japan. Both in Japan and Korea, the largest component in ICT investment is computing equipment. In the case of resource reallocation across sectors, the reallocation effect of capital input was negligible or negative for most periods both in Korea and Japan. After the financial crisis of 1997-99, the resource allocation effect of capital in Korea remained negative, although the size of the negative effect declined. On the other hand, the reallocation effect of labor input was positive for most periods both in Korea and Japan.

Suggested Citation

  • Kyoji Fukao & Tsutomu Miyagawa & Hak K. Pyo & Keun Hee Rhee, 2011. "Estimates of Total Factor Productivity, the Contribution of ICT, and Resource Reallocation Effects in Japan and Korea," Global COE Hi-Stat Discussion Paper Series gd10-177, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd10-177
    as

    Download full text from publisher

    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd10-177.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    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. Dale Jorgenson & Mun Ho & Jon Samuels & Kevin Stiroh, 2007. "Industry Origins of the American Productivity Resurgence," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 229-252.
    3. Guido Sandleris & Mark L. J. Wright, 2014. "The Costs of Financial Crises: Resource Misallocation, Productivity, and Welfare in the 2001 Argentine Crisis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 87-127, January.
    4. 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.
    5. Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
    6. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
    7. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-268, August.
    8. 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.
    9. 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.
    10. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, vol. 119(538), pages 374-403, June.
    11. 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.
    12. Sanghoon Ahn & Kyoji Fukao & Keiko Ito, 2008. "Outsourcing in East Asia and its impact on the Japanese and Korean Labour Markets," OECD Trade Policy Papers 65, OECD Publishing.
    13. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Akira Kohsaka & Jun-ichi Shinkai, 2013. "It's Not Structural Change, but Domestic Demand: Productivity Growth in Japan," OSIPP Discussion Paper 13E005, Osaka School of International Public Policy, Osaka University.
    2. MIYAGAWA Tsutomu & TAKIZAWA Miho & TONOGI Konomi, 2016. "Declining Rate of Return on Capital and the Role of Intangibles in Japan," Discussion papers 16051, Research Institute of Economy, Trade and Industry (RIETI).
    3. Keun Hee Rhee, Hak K. Pyo, 2012. "Aggregate Total Factor Productivity and Resource Reallocation Effect of ICT Sectors in Korea: A Comparison with the USA, Japan and EU7," Korean Economic Review, Korean Economic Association, vol. 28, pages 189-219.
    4. FUKAO Kyoji & IKEUCHI Kenta & YoungGak KIM & KWON Hyeog Ug, 2015. "Why Was Japan Left Behind in the ICT Revolution?," Discussion papers 15043, Research Institute of Economy, Trade and Industry (RIETI).
    5. repec:bla:revinw:v:63:y:2017:i:1:p:1-29 is not listed on IDEAS

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hst:ghsdps:gd10-177. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tatsuji Makino). General contact details of provider: http://edirc.repec.org/data/iehitjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.