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The decomposition of productivity gap between Estonia and Korea

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  • Sepp, Jüri
  • Varblane, Uku

Abstract

The paper presents a decomposition of productivity gap between South-Korea and Estonia for the year 2006. After presenting stylised facts related to income conver-gence, we apply shift-share analysis to explain the patterns of structural disparities both at aggregated sectoral level and within the manufacturing sector. We propose an extension to conventional shift-share analysis with using relative productivity indi-cators. Decomposition shows that the overall productivity gap is mainly related to the manufacturing sector. The results show that at sectoral view, discrepancies in productivity levels of individual sectors (within-effect) play the dominant role in productivity gap formation, whereas we find some support for the structural-bonus hypothesis within the manufacturing sector. In line with the previous studies, relative-ly high productivity in financial intermediation and real estate sector as a feature of young market economies was confirmed.

Suggested Citation

  • Sepp, Jüri & Varblane, Uku, 2014. "The decomposition of productivity gap between Estonia and Korea," Discourses in Social Market Economy 2014-03, OrdnungsPolitisches Portal (OPO).
    • Handle: RePEc:zbw:opodis:201403
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    References listed on IDEAS

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    1. de Vries, Gaaitzen J. & Erumban, Abdul A. & Timmer, Marcel P. & Voskoboynikov, Ilya & Wu, Harry X., 2012. "Deconstructing the BRICs: Structural transformation and aggregate productivity growth," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 211-227.
    2. Timmer, Marcel P. & Szirmai, Adam, 2000. "Productivity growth in Asian manufacturing: the structural bonus hypothesis examined," Structural Change and Economic Dynamics, Elsevier, vol. 11(4), pages 371-392, December.
    3. Marcel P. Timmer, 2000. "The Dynamics of Asian Manufacturing," Books, Edward Elgar Publishing, number 1927.
    4. repec:dgr:rugggd:gd-121 is not listed on IDEAS
    5. Kolev, Stefan, 2010. "Der bulgarische Weg seit 1989: Wachstum ohne Ordnung?," Discourses in Social Market Economy 2010-12, OrdnungsPolitisches Portal (OPO).
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    Keywords

    decomposition; productivity gap; structural change; employment;
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