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Structural Change and Economic Growth: Productivity Decomposition of Korean East Sea Rim Countries

  • Journal of Asia-Pacific Studies
  • Abbr : JAPS
  • 2019, 26(3), pp.5-23
  • DOI : 10.18107/japs.2019.26.3.001
  • Publisher : Institute of Global Affairs
  • Research Area : Social Science > Social Science in general
  • Received : August 16, 2019
  • Accepted : September 10, 2019
  • Published : September 30, 2019

CIN BEOM CHEOL 1

1경기대학교

Accredited

ABSTRACT

This paper analyzes the effects of structural change on productivity and economic growth of countries near Korean East Sea, specifically Korea, China and Japan over the period 1970-2015. To do so, the productivity effects are decomposed by employing Asia KLEMS and World Bank data databases. The results show that Korean intra effects of structural change on productivity growth have been increasing before Korean financial crisis but decreasing after the crisis. Over the whole period, within-effects is found to be smaller than the sum of static and dynamic between-effects which is created by shift in employment share across the sectors. This implies that effects of shift in employment from industries with slower productivity growth toward those with faster productivity growth can have larger than intra-effects only with changes in industrial composition but without any changes in productivity. For China, in contrast with Korea and Japan, the results show that all productivity effects are positive and increasing over time, indicating no solid evidence for Baumol’s disease yet. For all countries above, the results show that within-effects are positive and larger than between-effects, which supports structural bonus hypothesis, rather that structural burden hypothesis or Baumol’s disease hypothesis. Overall, the experience from the three countries near Korean East Sea tells us that the effects of structural change are dependent on development stages. In earlier stage of development, the effects are larger than in later stages of development, which leads to different contribution to economic growth.

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This paper was written with support from the National Research Foundation of Korea.