The purpose of this paper is to examine indirectly the effect of market liberalization in Korean petroleum and refining industry sector on productivity through the analysis of productivity performance before and after 1997, in which the Korean government had started to carry out deregulation policies in petroleum and refining industry sector. For this purpose, the sample period 1990-2002 has been separated into two periods, namely, 1990-1996 and 1997-2002. In addition, using the firm level data of the petroleum and refining sector, we have estimated the Malmquist productivity index which can be decomposed into two indexes, efficiency change index and technical progress change index.
According to the empirical results, during the whole sample period, technical progress rather than efficiency improvement has contributed more to the growth of total factor productivity(TFP). Second, the growth rate of TFP has been increased more after the market liberalization in 1997. Thus, we could argue that we have observed the positive effect of deregulation in petroleum refining sector in Korea. However, we also observed the trend of TFP has been declined in the last two years of the sample period.
In the comparison among three groups: non-refining, refining firms listed and refining firms unlisted in the stock market, the productivity performance of non-refining firms shows a relatively stable trend in 1998, right after the financial crisis in 1997. Among the refining firms in the sample, the listed firms show higher productivity gains compared with that of the unlisted firms.